An Analytical Study of the Impact of Dollar-Rupee Movement on Indian Equity Market.

Topics: Stock market, Stock, Stock exchange Pages: 4 (1097 words) Published: February 15, 2012

An analytical study of the impact of Dollar-Rupee movement on Indian equity market.

The study is about how the Rupee appreciation or Rupee depreciation against Dollar impacts the investors in Indian equity market. The study details about the concepts of Currency fluctuations, Rupee appreciation and Rupee Depreciation. * Currency fluctuation

There are mainly two ways by which currency rates are managed. Firstly, countries fix their currency against dollar. Hence the exchange rate doesn't change. Government takes action to manage any fluctuation that may happen. Secondly, countries leave it to the market to decide their exchange rate. In such a system, countries follow policy of non-interference. India doesn't have a fixed value of rupee against dollar but it also doesn't keep its currency completely floating against dollar. We have a system where the central bank allows rupee to fluctuate within a specified range. Usually, rupee appreciation is taken as economy gaining strength while depreciation is taken as Indian economy losing strength.

* How it impacts investors
Rupee appreciation:
Rupee appreciation is considered bad for companies where major part of their revenue comes from export. Appreciation of rupee makes products more expensive for export. When the products become expensive, importing nations either reduce the import or look out for other nations that can produce the same product at cheaper prices. Hence, any appreciation in rupee is often accompanied with cry by export companies to devalue the currency. For example, software industry and textile companies will be affected by Rupee appreciation. Rupee appreciation is good for companies that depend on import from other countries. For example, oil companies, Parma, Engineering, and medical device companies will be fine with rupee appreciation. The machinery, oil, and engine used in such industries will be cheaper...

Bibliography: 10. ANNEXURE
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