Abstract: This study examines the impact of foreign exchange rate, i.e., US Dollar to Indian Rupee (USD/INR) on Indian Stock Market Index (Nifty 50) during demonetisation of high denomination Indian currencies. Daily rate of return of Foreign exchange rate (USD/INR) and Indian Stock Market Index (Nifty 50) were considered for the study. ‘Dummy’ variable was used to measure the effect of demonetisation during Nov/Dec 2016. The period of study was restricted to 243 days from 1st April 2016 to 31st March 2017. Study reveals that there was an upward trend observed in Indian Stock Market and Indian currency was strengthened with the decrease in Foreign exchange rate (USD/INR).