This study investigated the relationship between Exchange Rate and the Indian Stock Market Index. For the purpose the study it considered S&P CNX Nifty and Exchange rate (INR vs. US $.) for the period of five years from April 2012 to March 2017. The study found out that S&P CNX Nifty Index returns earned high return with high risk and the Exchange rate returns recorded low return with low risk. Both returns were normally distributed during the study period. Further it found that there was no significant relationship between S&P CNX Nifty Index and Exchange rate returns. The ADF test concludes that the time series were stationary at level difference itself. The Granger Causality Test concludes that there is bidirectional relationship exists between Exchange Rate and Nifty Returns. The study also confirmed that Exchange rate returns enjoyed long run relationship with S&P CNX Nifty Index returns during the study period.
Keywords
Exchange Rate, Long Run Relationship, S&P CNX Nifty Index.
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