An analytical study on the movement of nifty index and exchange rate

The changes in the capital market bring transformation in the entire economy of the country. The boom and depression of the capital market is reflected in all sectors of the economy. Stock price downward movement continuously in the market forewarns the crisis period in advance. Numerous studies were conducted to trace the movement of stock market and its relationship with various economic factors. CNXNIFTY Index of NSE has been taken to compare the stock market movement with exchange rate. This Index is a well diversified one, which represents the major industries of the economy. This study analyses the dynamic relationship between stock market and exchange rate. As US Dollar is a prominent currency for foreign trade, the exchange rate of rupee and US Dollar has been taken for the study. The result found out that there is a bidirectional causal relationship between exchange rate and Nifty Index.