Impact of Volatility in Exchange Rate on Stock Market

Abstract

As it is important to evaluate the variables that raise stock market returns which are of considerable significance for investors which decisionmakers, many financial experts have formed a link between stocks and exchange rates as they take an significant part in affecting the economic growth of a country. This research aims to identify the impact of exchange rate volatility on Indian stock markets. Moreover, the ratio of market returns to foreign currency fluctuations is been used in anticipating the future patterns for each other by financial specialists. The relationship of portfolio return stability and motion of USD, YEN, EURO and GBP as far as interdependence is concerned on SENSEX and NIFTY50. The descriptive statistical was calculated so that the general idea of the data type can be analyzed using GARCH Model. This helped in the process to evaluate the impact path by integrating the two variables SENSEX and NIFTY50 index prices with each of the four exchange rates. The research results show that currency rates and equity markets are unrelated and that both factors are autonomous.