The Influence of Currency Fluctuations on NSE Market Capitalization: An Econometric Analysis

Purpose: This study looks at how currency fluctuations affect the NSE's market capitalization. This study examines historical data from 2013 to 2023 to identify trends, underlying causes, and potential implications for investors and policymakers. The study employs econometric modelling techniques to investigate the relationship between currency exchange rate fluctuations and stock market capitalization. Design/methodology/approach: To assess the impact of currency fluctuations on the NSE market capitalization, a quantitative research methodology was used, which included regression analysis. The study used secondary data sources such as official financial statements, exchange rate repositories, and stock market indices. The data were statistically analysed using econometric models, ensuring robust and reliable results. The selection of principal explanatory variables was guided by literature and empirical research, ensuring a thorough assessment of currency exchange rate effects. Findings: The analysis revealed that exchange rate fluctuations had a significant impact on the NSE's market capitalization. There was a strong correlation between the movement of the INR against primary global currencies and changes in the NSE's overall market valuation. The findings show that instances of INR depreciation are frequently associated with increased market volatility and fluctuations in investor sentiment. The study also emphasizes how macroeconomic variables such as inflation, interest rates, and foreign direct investment (FDI) influence the relationship between exchange rate fluctuations and stock market capitalization. Practical Implications: The study provides valuable insights for investors, policymakers, and financial analysts into the impact of currency fluctuations on stock market trends. The findings emphasize the importance of exchange rate risk management strategies for investors seeking to minimize potential losses. Policymakers may use the findings to develop regulatory frameworks that promote market stability and foreign investment. Originality/value: This study adds to the current knowledge base by conducting an empirical analysis of the effects of currency exchange rate fluctuations on NSE market capitalization. In contrast to previous studies, which primarily focus on short-term fluctuations, this study takes a decade-long perspective. The findings improve understanding of market dynamics, allowing stakeholders to make informed investment and policy decisions.