Analysis Of the Relationship Between Stock Market and Foreign Exchange Market

Abstract This paper will analyze how the stock market, in this case Nifty 50 and the foreign exchange market are related, with the help of historical data, between 2020 and 2025. The main purposes were to examine the tendencies and changes in the two markets and also to determine the effects of the foreign exchange rates to stock market performance. Investing.com was used as the source of secondary data, which contained stock index and major currency pairs closing prices daily. The data sets were sorted, harmonized by the date, and analyzed with the help of the SPSS software. The market trends and how forex variables of opening price, highest price, lowest price, and percentage change impacted stock market returns were assessed using descriptive statistics, correlation analysis, and regression analysis. The regression equation showed that there was a significant overall correlation between forex indicators and stock prices, with a value of R of 0.865 and a value of R2 of 0.748, which implied that about 74.8 percent of the changes in prices of the Nifty 50 could be attributed to a combination of the modelling forex indicators. The results on ANOVA were used to confirm the statistical significance of the model (F = 46.707, Sig. = 0.000). But, single regression coefficients revealed that majority of forex indicators did not produce significant independent effects on stock prices, except the lowest price, which indicates a marginal effect. The results partly agree with the assumption that the stock market returns depend on the movements of the foreign exchange rates. All in all, the paper underscores the interrelations between stock and forex markets and points out that although joint forex variability can strongly affect stock prices, the effects of individual variables might not be as strong. These lessons can help investors, financial analysts and other policy makers to make informed decisions, deal with risk and understand behavior of the market in a more connected financial world. Keywords: Stock Market, Nifty 50, Foreign Exchange Market and Exchange Rate Volatility.