FUNDAMENTAL DETERMINANTS OF STOCK PERFORMANCE: AN EMPIRICAL ANALYSIS OF NIFTY BANKS IN INDIA

Abstract

This study examines the fundamental determinants of stock performance of Nifty Bank constituents in India, aiming to identify the key financial variables that influence market returns. The banking sector plays a critical role in economic development, and understanding the drivers of stock performance in this segment is essential for investors, policymakers, and financial analysts. The research employs an empirical approach using panel data of selected Nifty Bank stocks over a defined period. Key financial indicators such as earnings per share (EPS), return on equity (ROE), net interest margin (NIM), capital adequacy ratio (CAR), asset quality (measured through non-performing assets), and firm size are analyzed to assess their impact on stock returns. Secondary data is sourced from annual reports, stock exchange databases, and financial statements. Statistical tools including correlation analysis and multiple regression models are utilized to evaluate the relationship between fundamental variables and stock performance. The findings reveal that profitability indicators, particularly EPS and ROE, have a significant positive influence on stock returns. Asset quality and capital adequacy also emerge as important determinants, reflecting the importance of financial stability in investor decision-making. Conversely, higher levels of non-performing assets negatively impact stock performance, indicating market sensitivity to risk exposure. The study highlights that fundamental analysis remains a crucial approach in predicting stock behavior within the banking sector. It also underscores the importance of strong financial health and efficient asset management for enhancing shareholder value. Overall, the research contributes to existing literature by providing sector-specific insights into the Indian banking industry and offers practical implications for investors seeking informed portfolio decisions. Future studies may incorporate macroeconomic variables and behavioral factors to further enrich the understanding of stock performance dynamics.