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Analysis Study Research Paper | Economics and Finance | Volume 15 Issue 4, April 2026 | Pages: 141 - 148 | India
An Analysis of Exchange Rate Movements and Foreign Institutional Investment in India: Evidence from the Post-COVID-19 Period
Abstract: The global financial markets have been characterized by increased uncertainty over the post-COVID-19 period with major changes in the capital mobility, monetary policy positions as well as changes in exchange rates among the emerging economies. In this changing environment, the relationship between the movement of the exchange rate and foreign portfolio capital has taken a new significance. The paper is an investigation of the correlation between the change in the USD/INR exchange rate and aggregate Foreign Institutional Investment (FII) flows in India in the post-pandemic period. The analysis places the analysis in an era of continued depreciation of the currency and high levels of cross-border capital flows, where the nexus of exchange rate and capital flows are re-examined as a result of the study. The paper assesses the strength and direction of interaction of exchange rate movements and FII flows by using monthly time-series information combined with descriptive statistics, regression analysis, and the Granger causality tests. The results show that although these two variables are highly volatile, their direct correlation is low and statistically not significant. The change in the exchange rate only explains a small percentage of the fluctuations in FII flows whereas the movement of capital does not culminate as a leading factor of the exchange rate behavior during the study. The findings indicate that the effect of currency movement on post-COVID capital allocation decisions has been outweighed by global liquidity conditions, risk perceptions, and macro-financial factors. The study shows the importance of wider analytical models in the external sector analysis by pointing out the reduced explanatory capacity of exchange rates in the determination of FII behavior at a time of structural global adjustment. The article adds to the modern discussion of capital flow management by highlighting context-related dynamics and warning of too deterministic explanations of exchange rate-investment relationships in the post-crisis setting.
Keywords: Exchange Rate, Foreign Institutional Investment, Capital Flows, Emerging Markets; Time-Series Analysis
How to Cite?: Piyumita Ajinkya Chavan, Yasmin Irshad Mutwalli, "An Analysis of Exchange Rate Movements and Foreign Institutional Investment in India: Evidence from the Post-COVID-19 Period", Volume 15 Issue 4, April 2026, International Journal of Science and Research (IJSR), Pages: 141-148, https://www.ijsr.net/getabstract.php?paperid=SR26402130704, DOI: https://dx.dx.doi.org/10.21275/SR26402130704