Abstract STUDY OF FOREIGN EXCHANGE EXPOSURE IN INDIAN CORPORATE FIRMS

This article attempts to estimate foreign exchange exposure of Indian corporate firms by using different trade weighted exchange rate indices of the sample of 27 Indian nonfinancial firms for a period between 2009 and 2013 by estimating foreign exchange exposure by using Ordinary least square regression by considering various issues connecting to exchange rate exposure. This paper analyses the relationship between exchange rate changes and stock returns for a sample firms by estimating foreign exchange exposure. The bench marked method of Jorion's model of foreign exchange exposure estimation was used and results are explained and compared with earlier studies in the international level. All the findings are substantially higher than the previous researches in the area of foreign exchange exposure. The results indicate that on average, Indian firms benefit from an appreciation of the home currency and they may lose from a depreciation of home currency. The study concluded that the overall, there is only weak significant evidence of the sensitivity of stock returns to changes in trade weighted foreign exchange-rate index