An Insight into The Determinants on the Valuation Accuracy for Bank Stocks in Indian Stock Market- An Empirical Analysis

Abstract

Investors in stock market using different valuation models to pick the stocks from Indian stock market. Few valuation models are accurate for some stocks due to various reasons. There are different factors determining the accuracy of valuation for bank stocks in Indian Stock Market. This paper studies on the importance of six equity valuation models in terms of valuation accuracy of bank stocks in Indian Stock Market. This paper shows the determinants such as Size, Profitability and Ownership of bank determining the accuracy of valuation models for BSE Bankex stocks in Indian Stock Market. This study selected P/E Model, P/B model, Ohlson Model, CAPM, Dividend Discount Model and Excess return Model for valuation accuracy determinants of Bank Stocks in Indian Stock Market. This study selected a sample of 14 banks which constitute the BSE Bankex. It was found that size, profitability and ownership of bank are the most important determinants determining the valuation accuracy of banks in Indian stock market.