Exchange Rate Volatility And Its Impact On The Financial Performance Of Non-Financial Indian Firms: An Empirical Analysis

Abstract

This study examines the impact of exchange rate volatility on the financial performance of non-financial Indian firms through a structured empirical analysis. Drawing from a sample of 150 firms listed in Indian stock indices, the study distinguishes between export-oriented and domestically focused companies to assess differential exposure to currency fluctuations. Utilizing secondary data over a five-year period (2019–2024), the study employs correlation analysis, multiple regression models, and t-tests to evaluate the relationship between exchange rate volatility and financial indicators such as Return on Assets (ROA), Earnings Per Share (EPS), and Net Profit Margin. The results reveal a significant negative association between currency volatility and firm performance, particularly for export-driven firms. Additionally, the study finds that companies employing hedging strategies exhibit greater financial stability during volatile periods, highlighting the importance of financial risk management. The findings emphasize the need for firms to adopt proactive currency risk mitigation measures and for policymakers to encourage greater awareness and accessibility of hedging tools in the Indian corporate sector. This research contributes to the growing literature on exchange rate exposure in emerging markets and offers strategic insights for managers, investors, and regulators navigating a globally integrated economy.