A Study of Relationship between Exchange Rate Volatility and Banking Indices (BANEX) - An Indian Perspective

Abstract

There has been an extensive debate on measuring the sensitivity of returns of stocks. Particularly some Internal and External conditions are involved in measuring the sensitivity of returns of stocks like; industrial Production, money Supply ,Foreign exchange Rate, Interest rate, gold prices, GDP and oil prices in the world economy are involved in external conditions whereas dividend policy, earning per share etc are the contributors of internal factors. This paper examines the impact of Macro (External) factor i.e. Exchange rate on BSE Bankex. Macroeconomic indicators are already exhibiting signs of deterioration as Rupee is depreciating against dollar. Especially, an attempt has been made to explore the relation between stock market performance and exchange rate. The results are mixed but interesting whereas, there is significant correlation between stock market and exchange rate.

Keywords

• stock market
• macro economic variables- exchange rate
• bse-bankex