The broad objective of this study is to analyse the long term relationship and short term dynamic interlinkages between Indian stock prices and foreign exchange rate. This paper is based on 10 years’ daily data i.e. from 1 Jan 2010 to 31 Dec 2019 of nominal exchange rates of US Dollar, Euro and daily closing values of Nifty 50. In this study, Augmented DickeyFuller (ADF) is applied to test stationarity of data and it is found stationary at first difference. Karl Pearson correlation test is used to find the correlating relationship between the variables and it is found that both the variables are not correlated significantly. Johansen’s co-integration test is applied to determine the long-run equilibrium relationship between the variables which revealed that there exists cointegration relationship (long-term balance) between the exchange rate and stock prices in India. Read more
