Impact of Exchange rate Volatility on Stock Returns-An Empirical Study on Selected Small and Medium Enterprises (SMEs) in Indian Pharma Sector

This paper empirically investigates the relationship between stock returns and Indian rupee-US Dollar Exchange Rates. To study the relation between stock returns of pharma companies and exchange rate volatility, based on the availability of data and judgemental sampling, a sample of 20Small and Medium Enterprises(SMEs) in Indian pharma sector has been chosen. A number of statistical tests have been applied in order to study the behaviour and dynamics of both the series. Using monthly time series data, the empirical analyses has been carried out for the period 2005 to 2013. Various statistical techniques have been applied to determine the normality, stationarity, correlation, co-integration andheteroscedasticity between the two series i.e. stock returns and Indian rupee-US Dollar Exchange Rates.