Finance, Forex and Investments

connection between rate of foreign currency & indices of stock market of a country ?

nowadays all indian people know that the SENSEX is dropping continuosly. what is the reason behind that ? we know that anyhow it will rise again then why it is said that "this time is not suitable for small investers ?"even if we are going to profit from it (after a long time, at least). i also observed that foreign currencies are on hike(when indices are dropping). agnst. they were dropping when market was in good mood . WHY ?

Public Comments

1. You may have made a good observation but there is little empirical evidence to correlate the fall in the rupee and the stock markets.. Having said that, the reason for the fall can be largely associated with the selling by FII, now u must know that when FII sell their stocks they sell rupees and convert them to dollars, that being their primary currency , This huge sell off of rupees drives the demand for dollars ultimately pushing the dollar price up against the rupee, unless the RBI intervenes and starts buying rupees to suck the excess liquidity in the system the slide in the rupee is going to continue. Hope that partly answers ur question!