Measurement of Foreign Currency Risk Exposure of Top Five BSE Sensex 30 Companies.

Foreign exchange currency risk exposure is relevant to all firms operating in the market. Every firm faces direct risk exposure from their operations and indirect risk from the competition, interest rates and other factors. Also, in the growing markets, firms look to expand their markets and they are posed with risk from currency exchange rate movements. Thus, it is a necessity for all firms to analyse their risk exposure from time to time and enhance its performance. This paper aims to measure the risk exposure of BSE Sensex 30 companies which have large market capitalisation and the risk exposure is measured with the four most traded currencies. The paper finds that only 16% of the firms faced significant exposure from exchange rate movements. The degree of effect and the currency variables differ from firm to firm due to non-homogeneity of the firms. Large firms usually measure the risk exposure and take appropriate hedging for them. Only US Dollar and Pound have impact on some of the firms. [ABSTRACT FROM AUTHOR]