Risk and return dynamics of indian banking stocks: A cross-sectoral empirical study

Abstract

This study aims to examine the risk-return characteristics of selected Indian banking stocks—across public and private sectors—over a 15-year period (2010–2025). It investigates the influence of core financial indicators (EPS, DPS, ROA, P/E) and sustainability metrics (ESG scores) on stock returns, using a robust empirical framework.The study adopts a longitudinal analytical design involving ten leading Indian commercial banks (five each from public and private sectors). Secondary data on stock prices, financial ratios, and ESG scores were collected from NSE, annual reports, and Bloomberg databases. Analytical tools include descriptive statistics, Pearson correlation, multiple linear regression, and risk-adjusted performance measures (Sharpe and Treynor Ratios), executed via SPSS.Private sector banks significantly outperformed their public counterparts in both raw and risk-adjusted returns. Regression results show that EPS and ROA are the strongest predictors of stock performance, followed by DPS, ESG, and P/E. ESG scores, in particular, emerged as a statistically significant determinant, reflecting the growing market integration of sustainability disclosures. The model explained 53.2% of return variability, with no multicollinearity.The findings suggest that investors should incorporate both financial efficiency and ESG compliance in equity selection strategies. Regulators must enforce stronger ESG disclosure norms, and bank managements should align profitability with sustainability to attract value-conscious capital.This is one of the few studies in the Indian context to integrate financial and ESG factors across a full 15-year horizon, offering granular insights into intra-sectoral banking equity performance.