An Analysis of Stock Returns and Exchange Rates: Evidence from IT Industry in India

Abstract

This paper attempts to examine the relationship between exchange rates and IT stock prices. The data for the study was taken from the information of daily closing observations of the NSE CNX IT Index and the nominal Indian Rupee per US dollar exchange rates. The study was based on exchange rate of Indian rupee and US Dollar. Statistical tests were applied to study the behavior and dynamics of exchange rates. The results of the study indicate that, both CNX IT Nifty returns and Exchange Rates are not normally distributed. Also it was found that, time series; Exchange rate and CNX IT returns are stationary at the level form itself. A negative correlation is observed between CNX IT returns and Exchange Rates. The direction of influence between two series is verified by the Granger causality test and the results of the test states that Exchange rates, clearly, Granger cause the IT stocks whereas IT stocks prices cannot be said to direct the Exchange rates.