Impact of inflation and exchange rate on stock market returns in India: An ARDL approach

Abstract

The study examines the impact of exchange rate and inflation on stock market (Nifty-50) returns in India using monthly data spanning from April 2013 to February 2024. The autoregressive distributed lag (ARDL) cointegration and error correction parameterization approach is applied to analyse this relationship. The findings reveal an insignificant long-run association between stock market returns and both inflation and the exchange rate. However, there is a significant short-run relationship between stock market returns and both inflation and the exchange rate.

Keywords

• ardl cointegration
• exchange rate
• inflation
• stock market returns
• unit root test