Asymmetric Response of Indian Sectoral Indices to Bilateral Exchange Rates With US Dollars, Euro, Yen and Pound Sterling

This study examines the responsiveness of sectoral stock returns to four bilateral exchange rates (ER), namely USD/INR, Euro/INR, Pound Sterling/INR, and Yen/INR, in India from January 2016 to September 2024 using a nonlinear ARDL (NARDL) model. Results show that shocks to India’s bilateral exchange rates with the US dollar and the euro significantly influence the NIFTY 50, NIFTY Manufacturing, and NIFTY Services indices. However, shocks to Pound Sterling/INR and Yen/INR have weak or no influence on these stock indices.