Risk and returns relationship of private sector banks stocks: Application of Capm Model

The paper attempts to measure the relationship between risk and returns, and the effect of expected returns in the Indian Stock Market by applying CAPM. For the analysis, daily adjusted opening and closing prices of sample stocks of banks and Standard & Poor CNX Nifty were used. The study found that there was high positive correlation between systematic risk and expected returns. CAPM provides a better indication of systematic risk and estimates required rate of returns. The results, so obtained, hold applicability of CAPM in Indian Stock Market and in establishing the trade-off between risk and returns.