Study of interest rate risk and its impact on private and public banks stock return: Comparative study

Banks profitable performance is pivotal for strengthening the growing economy of a country. Interest rate risk is one of the important forms of risk that banks faces. It is challenging for banks to monitor and manage interest rate risk and simultaneously maintaining profitable position. Banks profitability and performance influences its stock price; where both are affected by interest rate change. This study examines the effect of interest rate fluctuations on the selected public and private banks stock return during the period April 2015 to March 2017. The study considered stocks of selected banks and NSE nifty which reveals absence of effect of interest rate change on the banks stock return through event study methodology. Stock returns of neither public banks nor private banks have impact of interest rate change and cumulative average abnormal return of these banks showed almost the same pattern which specifies stock returns of the banks are not affected by the interest rate fluctuations. But private banks stock returns are affected in the event 1 by interest rate change.