The Impact of USD-INR Exchange Rate on Stock Market Return
Simran Singh MBA student, Mittal School of Business, Lovely Professional University, India email: simransingh62068@gmail.com
Dr. Rohit Bansal Associate Professor, Mittal School of Business, Lovely Professional University, India email: rohit.bansal@lpu.co.in
ABSTRACT
This paper analyses the correlation between the USD-INR exchange rate fluctuations and the stock market returns in India between the years 2019 and 2026. In a more globalized economy, the exchange rate fluctuations are very important in shaping the financial markets and it is therefore important to know how currency movements impact on the stock performance. The main aims of the research are to examine the relationship between the exchange rate fluctuations and stock returns, to assess the effects of the fluctuations through regression analysis, and to establish the causality direction between the two variables. The study is founded on secondary data gathered through credible financial sources and the objectives are met with the help of the relevant statistical tools including correlation analysis, regression analysis, and the Granger causality test. Correlation analysis assists in determining the nature and strength of the relationship whereas regression analysis quantifies the degree to which exchange rate changes affect stock market returns. The Granger causality test also gives information on whether the stock returns are caused by the exchange rate movements or the reverse. It is hoped that the study findings will be of great help to investors, financial analysts, and policymakers as they will enhance their knowledge on the relationship between the foreign exchange market and the stock market. This can aid in making better investment decisions, risk management and making informed policy. In general, the research adds to the further insight into the dynamic nature of the exchange rates and stock market performance in the Indian setting.
Keywords – Exchange rate, stock market returns, financial market, Indian economy
