Impact of Changing Value of Dollar and FIIs on the Indian Stock Market
Author : Arhaan Gulati
Modern School, Delhi, India
gulatiarhaan28@gmail.com
Abstract
The dollar most definitely has an impact on the Indian stock market and the flow of FIIs into the country but it is only one of the factors. A move by the US to enter the war later than most of the European countries was the first step in the dollar becoming the benchmark currency in the world which was then followed by the Bretton Woods agreement that in turn led to most countries having the dollar in their foreign currency reserves. Once the USD was not backed by gold, a shift to some other currency was not considered as most countries had USD in majority in their foreign exchange reserve. The poor state of the Indian Economy, the Indo - China war, the Indo-Pak war, the balance of rupee crisis, the economic crisis in 1991, the global economic crisis, demonetisation and the covid pandemic has seen the value of rupee go from 4.76 INR to 82.82 INR against 1 USD. The fluctuating value of the rupee is a key factor in deciding the flow of FIIs into the economy which helps in building the economy. FIIs have played a key role in building the Indian economy. From almost no flow of FIIs into the economy, there was a big surge in FIIs from USD 100 million in 1990-91 to USD 30 billion in 2017-18.The present research paper aims at the impact of the FIIs on the economy and stock market exists but the gap that exists as of now is that no one has researched on the impact of the US dollar in particular on FIIs and in turn the impact of FIIs on the stock market and economy. It has been found that there is high correlation between the three and has a significant effect which is discussed in the paper.
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