The 2008 financial crisis created a series of setbacks in major financial institutions worldwide. This paper attempts to investigate the volatility spillover effect between foreign exchange and stock market during different periods like pre-, post- and in-crisis period in India. By applying GARCH and EGARCH models in the daily data series of both rupee- dollar exchange rate and CNX Nifty return series, we report evidence of asymmetric and volatility spillover in the three sub-periods between these two markets. The post-crisis period has higher asymmetric and volatility spillover as compared to other periods. This result may help the investors, policy makers as well as portfolio managers for taking appropriate investment decisions.

At present the financial emergencies and liberalization have been felt by one and all in the global economy. The innovations in technology and new financial instruments instrumental for the quick integration of domestic market with international markets has quickened the transmission effect. The balance of payment crisis in 1991 gave rise to economic reforms in India. After liberalization of the economy, the prices were allowed to be determined by the market and the domestic financial markets got integrated with international financial markets. After that period, several crises took place in the global economy, e.g., 1994 Mexican currency crisis, 1997 Asian currency crisis, 1998 Russian crisis, 1999 Brazilian crisis, 2001 Argentine crisis, 2002 Turkish crisis, 2008 subprime financial crisis, and 2009 European debt crisis, resulting in a large number of negative asset returns and high volatility in financial markets. Financial crisis, by definition, refers to the problems associated with financial system like failure of banking policies, dysfunctioning of markets, collapse of stock market, declining asset prices, currency depreciation, sovereign defaults, etc. More specifically, each crisis is characterized by certain typical features and thus demands to be studied in a different manner. Financial crises have in general resulted in unexpected movements in the financial instruments; therefore there is a need to study the crises from the perspective of price movements or volatility.

Applied Finance Journal, Asymmetric, Volatility Spillover, Stock Market, Foreign Exchange Market, Foreign Institutional Investors (FIIs), Trade Weighted Index (TWI), Brazil, Russia, India and China (BRIC), Indian Experience.