An Empirical Study on Indian Stock Market and Foreign Exchange Rates – A Review on Relationship

Abstract

The connection between the two financial variables-stock returns and exchange rates- became particularly considerable in the wake of the 1997; Floating exchange rate makes easy greater volume of trade and high volatility in equity as well as Forex market, increasing its exposure to economic and financial risks. The present study analyses the return relationship between the Indian Stock Market and Foreign Exchange Rates. For the purpose, the secondary data were collected for the period of five year from January 2011 to December 2015 covers 1203 available harmonized days with closing prices of each variable. Then the collected data were converted for fitness and used various statistical tools to achieve results. The research found and strongly believes that both the time series, Stock and Exchange Rate Returns, were stationary at the level form itself and correlation confirmed that there were inverse relationship between Returns from Indian Stock Market and Forex Rate Returns during the elected study period.