Using NLP for News & Sentiment Analysis

The stock market moves not just on numbers but also on news and sentiment.

A policy change, a management comment, or even a social media buzz can shift prices overnight.

But no single investor can track every headline in real time.

This is where AI — through Natural Language Processing (NLP) — adds real value. In India, for example:

• An RBI policy announcement on interest rates can move bank stocks within minutes.
• A budget speech mentioning infrastructure spending can send cement and steel stocks rallying.

AI can scan, summarise, and flag these signals far quicker than any individual.

What is NLP?

Natural Language Processing (NLP) is a branch of AI that allows computers to “read” and make sense of human language. It can scan thousands of articles, tweets, and reports, and summarise what people are saying about a stock, sector, or the entire market.

Why Sentiment Matters

• Positive news (like profit growth or new contracts) can push a stock higher.
  Negative news (like fraud allegations or policy setbacks) can bring it down.
  
• Even neutral events can affect the mood if the market expected something else.
  

For traders and investors, knowing the sentiment trend helps in deciding whether to hold, buy, or stay away.

How NLP Works in Screening

Instead of you reading 100 headlines, AI does it for you.

Example Prompt:

“Analyse the last one month of news for Indian banking stocks and show whether sentiment is positive, negative, or neutral.”

AI can give you a simple table:

Combining Sentiment with Technicals or Fundamentals

The real edge comes when sentiment is layered with other rules.

Example Prompt:

“Find auto stocks with profit growth above 10%, trading above 200-DMA, and showing mostly positive sentiment in the last 30 days.”

This gives you not just numbers but also the market mood — a powerful combination.

Benefits of NLP in Screening

• Time saver: Scans news, social media, reports in minutes.
• Unbiased summary: Instead of emotional reactions, you get a sentiment score.
• Early alerts: Spot negative signals before they reflect fully in prices.

Limitations

• AI depends on the quality of sources. Fake news or biased articles can skew results.
• Sentiment is tricky — a “neutral” headline can still move markets depending on expectations.
• Always cross-check before making decisions.

Final Takeaway

NLP adds a new dimension to stock screening: it captures what the market is feeling, not just what the numbers say.

When combined with fundamentals and technicals, it gives you a fuller picture of a stock’s potential.

But remember — AI can summarise the mood, not replace judgment. The final decision to act should always be yours.