Impact of Foreign Exchange Rate on Stock Market

Exchange Rate Volatility: Impact on industriousness Portfolios in Indian Stock Market K N Badhani*, Rajani Chhimwal** and Janki Suyal*** This composition examines the interaction amongst changes in the deputize pass judgment of Indian Rupee and returns on different BSE-based indices representing the rigids of different sizes and industries. In unquestioning sense, the returns on all the acquit portfolios be found to be positively correlated with the external value of Indian Rupee. However, the compend with an extended market model of asset pricing shows that the indices of export-oriented industries are negatively associated with change in exchange tempo, after make the adjustment for market trend. Among them, IT, technology and knowledge-based welkins show high aesthesia towards exchange rate fluctuations. On the other hand, the indices of financial sector and import-intensive industries show a positive association with the exchange rate of rupee. The Vector Autoregression (VAR) model shows one-way causality running from stock prices to exchange rate. This suggests that the portfolio rebalancing activities of Foreign Institutional Investors (FIIs) have a more(prenominal) important role in the dynamic interaction between stock prices and exchange rate.

Introduction The implementation of flexible exchange rate regime, full convertibility of rupee in current account, and a gradational move towards full capital account convertibility have increase the volatility of exchange rate, and the issue of exchange rate picture show has become quite important for the corporate world. The volatility of the exchange rate of Indian Rupee in respect to US Dollar during recent periods has caused anxiety in m both lodge of the economy, particularly export-oriented sectors such as IT and Business Process Outsourcing (BPO). Since, any impact on competitiveness and profitability of a firm affects the future value of its expected cash flow which, in turn, depresss reflected in the market price of the its stock, this study makes... If you want to get a full essay, order it on our website: Orderessay

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