English Abstract
Abstract:
This study examines the impact of foreign exchange rate fluctuations on various NSE
capitalized indices of India. Five exchange rates were chosen based on trading contracts in the currency derivative segment of NSE. These exchange rates are US DollarIndian Rupee (USD/INR), Euro-Indian Rupee (EUR/INR), Great Britain PoundIndian Rupee (GBP/INR), Chinese Yuan-Indian Rupee (CNY/INR) and Japanese
Yen-Indian Rupee (JPY/INR), which are used as a regressor in this study. The data
of NSE Nifty large-cap 100, Nifty mid-cap 100 and Nifty small-cap from December 1,
2012 to December 1, 2022 was considered for the study. GARCH (1, 1) model was used
to analyze the nexus between exchange rate fluctuations and capitalized indices, and
it was further validated by DCC GARCH to evaluate the volatility spillover. The result
shows that exchange rate fluctuations have a positive effect on stock market volatility
along with a varying degree of incidence on small-cap, mid-cap, and large-cap. DCC
α has been found to be significant in USD & GBP for small-cap, and GBP & CNY for
mid-cap. On the other hand, USD, Euro, CNY and JPY have a significant impact on
the large-cap index in the short-run. Further, it is found that there is long-run spillover
effect (DCC β) of exchange rates on all capitalized indices of the Indian stock market,
and it is highest in in the large-cap case.
