A Study on Comparative Analysis of HDFC Bank and ICICI Bank on the Basis of Capital Market Performance

Capital market is a mechanism through which funds can be borrowed and lent for long period of time and stock price is determined though free interaction of market forces such as demand and supply. Since share price is market determined, often it does not reflect the true intrinsic value. There are different conceptual frameworks, tools and techniques to analyze the performance of capital market instruments which includes Markowitz model, Sharpe Single Index Model, Capital Asset Pricing Model, Technical analysis, Fundamental analysis, Efficient Market Hypothesis and different valuation approaches. All the models are based on some critical assumptions as well as on strong analytical foundations. It has been experienced that often these established empirical models are unable to forecast the movement of stock prices. Almost in all the cases, models are formed on the basis of simplistic assumption that investors are rational in nature where in reality; market is driven by emotion, sentiment, greed and fear of the investors. Thus the assumption of rationality of investors does not hold in real life. Hence company's capital market performance should be used as an integral part to analyze the perception of investors about the company instead of using the same to judge the fundamental strength of the company. Banking sector is chosen as it is highly regulated sector in India. HDFC bank has largest market capitalization among the banking players which is immediately followed by State bank of India (SBI) and ICICI bank . Since SBI is largest PSU bank in India, ICICI bank and HDFC banks are considered for comparative analysis in order to create a level playing field