A STUDY ON THE IMPACT OF EXCHANGE RATES ON THE INDIAN STOCK MARKET

at

XYZ PVT. LIMITED

Dissertation submitted in partial fulfilment of the requirements for the award of the degree of

MASTER OF BUSINESS ADMINISTRATION

of

CMR INSTITUTE OF MANAGEMENT STUDIES (AUTONOMOUS)affiliated to Bangalore University

by

Mr. SUDEEP SURESH CHATHOTH

Register No: 12201075

Under the guidance of

Ms. Geetha Venu Professor

Department of Management Program

CMR Institute of Management Studies (Autonomous)

C.A. #2, 3rd C cross, 6th ‘A’ Main, HRBR layout

2nd Block, Kalyana Nagar

Bengaluru-560 043

INTRODUCTION

The Asian crisis of 1997-98 has made a strong pitch for dynamic linkage between stock

prices and exchange rates. During the crisis period, the world has noticed that the emerging

markets collapsed due to substantial depreciation of exchange rates (in terms of US$) as well

as dramatic fall in the stock prices. This has become important again from the view point of

large cross border movement of funds due to portfolio investment and not due to actual trade

flows, though trade flows have some impact on stock prices of the companies whose main

sources of revenue comes from foreign exchange.

PROBLEM STATEMENT

There has been an increasing impact of exchange rates on the Indian Economy. Various

currencies have an impact on the Indian Stock prices. Certain currencies strengthen certain

sectors whereas certain sectors are weakened by exchange rates. Identification of the factors

affecting the Indian share market would help formulate appropriate measure in order to

mitigate the problems. This project also aims to identify specific patterns in the co

movements between exchange rates and stock prices. Over the years, Indian Rupee is slowly

moving towards full convertibility, which has also had an impact in the Indian capital market

as international investors have invested about US $15 billion in Indian capital market. In this

background, this study aims at examining the dynamic linkages between exchange rate of

Indian Rupee and stock market index in India.This project aims to identify how Exchange

Rates affect the stock prices and hence the Indian Share Market

OBJECTIVES

1. To study the trend in Exchange Rate and S&P BSE Sensex.

2. To study the impact of exchange rates on Indian Share Market.

3. To identify the sectors which are affected by fluctuation in exchange rates.

RESEARCH DESIGN

Methodology

The present study is directed towards studying the dynamics between stock returns volatility

and exchange rates movement. Focus of the study is towards Sensex returns and

The currencies which are being cross compared are Indian Rupee(INR)-US Dollar(US$) as

per RBI Reference Rates.

Period of study

The period studied is from 2008-2012

Technique of Data Collection

Data collection would be using the secondary methods of data collection.

The site being referred are www.rbi.org.in and www.sebi.gov.in for currecy related

information and stock related information.

LIMITATION AND SCOPE OF STUDY

1. Exchange rates which determine stock prices. It would not be possible to assess

qualitatively how much the stock prices are influenced.

2. The study is being conducted for dollar and rupee fluctuation and not for other

currencies . Hence it is difficult to assess if the same findings apply for other

currencies.

CHAPTER SCHEME

The caper schemes is overview of all the chapter

Chapter 1: Introduction

Chapter 2: Research Design

Chapter 3: Data Analysis and Interpretation

Chapter 4: Summary of Findings, Suggestion and Conclusion

BIBLIOGRAPHY

ANNEXURES

Sudeep Suresh Prof. GeethaVenu

(Student Signature) (Internal Guide Signature)