STATISTICAL ANALYSIS OF IMPACT OF FOREIGN EXCHANGE RATES ON BSE-SENSEX

Forex which is short form of Foreign exchange rate plays a vital role in Indian economy. Stock market usually shows the movements with respect to foreign exchange rates of different currencies. The secondary data of exchange rates of US Dollar (USD), Pound Sterling (GBP), Euro, Japanese Yen and Closing price of Sensex of 3860 days were taken for analysis from RBI and BSE websites. BSE - Sensex was considered as dependent variable and all four Forex rates were taken as independent variables. After verifying all the assumptions required for regression analysis using ordinary least square estimation the best model was fitted. It was observed that the effect of 1st difference of USD and 1st difference of Yen was negative and 4th difference of GBP was positive on 1st difference of Sensex. The exchange rate of Euro had no significant impact on BSE-Sensex. It may be due to the balance of trade of foreign economies with India.