AN EMPIRICAL STUDY ON RELATIONSHIP BETWEEN EXCHANGE RATE AND SECTORAL INDICES IN BSE

Abstract

The present study focuses on the relationship between exchange rate and sectoral indices listed in Bombay Stock Exchange(BSE) over the period 1.4.2015-31.3.2018. To analyse the sectoral relationship with exchange rate and vice versa, the ADF test, Johansen cointergartion, Granger Causality test and Correlation is applied for the study. The study found that exchange-rate changes have negative effects on some sectors but positive effects on others. Import intensive sectors like Bank, Auto, FMCG, Metal, infrastructure, IT, Oil& gas, realty and TECK responded negatively to the weakening rupee. Further, the study suggests individual and institutional investors to diversify their portfolio and can enjoy with handsome return from the market.