Risk Return Analysis of Bank Nifty Stocks With Special Reference to Public and Private Sector Banks in India

Abstract

Risk and return analysis plays a key role in most individual decision making process. Every investor wants to avoid risk and maximize return. In general, risk and return go hand in hand. If an investor wishes to earn higher returns then, the investor must appreciate that this will only be achieved by accepting a commensurate increase in risk. Banking sector is the backbone of country's economy. This sector has given very good return to the investors in the past. The Risk and Return are the two faces of the Investment coin. This paper studies the Market risk analysis of twelve Nationalized Banks and private banks in terms of Beta coefficient for the period from l'h December 2015 to 8th February 2016. The betas of State Sank of India, Industrial Development Bank of India & Syndicate Bank were negative which implies that these stocks moved against the market and less affected by market risk. On the other hand the betas of Punjab National Bank & Bank of Baroda were more than one. It indicates that these stocks were exposed to high market risk; i.e., any small changes in the market will directly impact on these stocks. The study based on secondary data collected from NSE. The data on weekly market prices of banking sector listed in Bank Nifty have been collected. In addition the other sources are also used for data collection like newspaper and internet (www. nseindia.com). Published data are available in newspapers, websites, journals, books, reports by management, scholars, researchers, brokers etc.., The reason behind choosing the weekly prices is that short term fluctuations in the market prices of the stocks due to internal and external factors. Though it is possible to make much an analysis using daily prices; collection of data for long period of time is not possible. Hence the weekly prices are considered.