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- Title
What Determines the Size of Bank Nifty?
- Authors
Rawlin, Rajveer S.; Ramachandran, Savitha Rani; Shanmugham, Ramaswamy
- Abstract
Banking stocks have been rebounding of late despite the lingering asset quality issues that have been plaguing the banking sector over the past few years. The bank Nifty index is the key index that tracks the performance of the largest bank stocks in India. Understanding the key drivers of bank size of this index would throw light on the performance of the banking sector at large. This paper studied the influence of key internal determinants on the size of bank Nifty components over a 10-year period from 2009 to 2018. The measure of bank size chosen was the logarithm of stock market capitalization. The internal determinants chosen for the study comprised a key profitability measure, the return on assets; a key lending measure, the credit/deposit ratio; income measures that include interest income/average working funds and non-interest income/average working funds; a key productivity measure, business per employee; a key asset quality measure, the logarithm of percentage net non-performing asset; and a measure of capital adequacy, the capital adequacy ratio. Lending, profitability, capital adequacy and income measures proved to be the important drivers of size of bank Nifty components. Stakeholders of banks should focus on these determinants as they seek to understand the rapidly evolving Indian banking landscape.
- Subjects
BANK stocks; NATIONAL Stock Exchange of India Ltd.; RETURN on assets; MARKET capitalization; STOCK exchanges
- Publication
IUP Journal of Bank Management, 2019, Vol 18, Issue 2, p30
- ISSN
0972-6918
- Publication type
Article