Dr. Nagella. Venkata Ramana, Mr. K. Subba Reddy, Dr. M. Sambasivudu
This research explores the intricate dance between currency rates of exchange and the Indian stock market index, BANK NIFTY. Spanning a substantial 12-year period, from January 1, 2010, to December 31, 2022, our investigation harnesses daily fluctuations in currencies like the British Pound (GBP), Japanese Yen (YEN), Euro (EUR), and US Dollar (USD), all measured against the stalwart Indian Rupee (INR). Through an adept combination of structured cointegration analysis and Granger causality tests, we aim to unravel the enigmatic connections lurking beneath the surface. As we unveil the findings, a notable revelation emerges the absenteeism of a steadfast long-run bond amid BANK NIFTY and the array of exchange rates under scrutiny. However, our astute application of VAR-based Granger causality tests casts a spotlight on the short-term dynamics, revealing that USD, EURO, and YEN wield a transient influence over BANK NIFTY. This intricate interplay is not unidirectional; BANK NIFTY's sway over the USD-INR exchange rate also comes to the fore. Investigating deeper, our analysis extends to the realm of impulse response, shedding light on the temporal nuances of BANK NIFTY's recovery from the ripples caused by exchange rate fluctuations. In this symphony of financial markets, we uncover the hidden times and measure changes that govern these complex relationships.
Keywords:Bank Nifty, Granger causality, Exchange Rates, Cointegration, Impulse response