Indian Banking Industry

T he banking industry in any economy provides its financial backbone.

This places it on a completely different platform from any other

industry, including regulated utilities. While its criticality for the

economy is undisputed, it is this criticality that also makes it vulnerable to

failure. This is the reason the banking industry is regulated, albeit in different

degrees, in every economy. A fair amount of research, both international

and Indian, has gone into determining the factors that affect bank

performance. However, the relationship between performance and stock

returns has not received much attention. With more and more banks in

India getting listed in the stock markets, shareholder value creation has

assumed importance along with the other traditional objectives these banks

(especially nationalised banks) were set up for. The challenge before banks

is to create such value by differentiating themselves from competition on

the one hand, while working within the regulatory boundaries on the other.

They do not enjoy the freedom firms in most other industries do with regard

to business strategy formulation and/or policy making. Hence, it makes

sense to look at what exactly banks need to concentrate on in order to

create an impact in the stock market.

An attempt is made in this paper to delineate the items of published

information that have an impact on stock performance from those that do

not, for the Indian banking