The study examines the level of foreign exchange exposure and its determinants for a sample of Indian firms. For this purpose, the relationship between exchange rate changes and stock returns for a sample of 361 Indian non financial firms is determined over April 2006-March 2011. The study finds that only 16 percent of the firms are exposed to exchange rate exposure at 10 percent level of significance. Furthermore, out of the firms having significant exposure, 86 percent firms are negatively affected by an appreciation of the rupee which confirms that Indian firms are net exporters. With respect to the determinants of exchange rate exposure, it reveals that export ratio is positively and hedging activity is negatively related to the exchange rate exposure of pure exporter firms.