2025, Vol. 8, Issue 1

author(s)
Undabatla Rambabu, Jannu Vinay, PSS Kalyan Darapaneni, Ramineni Vijaya Lakshmi and Prathipati Naga Durga Mahalakshmi

abstract
This study evaluates the risk-adjusted performance of financial services stocks in India using the Sharpe Ratio, comparing them against the Nifty Financial Services Index (NIFTYFIN). The analysis covers the period from 2020 to 2024, incorporating annual return data, standard deviation, and a risk-free rate of 6.69% based on the 10-year Indian government bond yield. The results indicate that Cholamandalam Investment & Finance (CHLA), ICICI Bank (ICBK), and Muthoot Finance (MCEI) delivered the highest risk-adjusted returns, with Sharpe Ratios surpassing the benchmark index. Conversely, stocks such as SBI Cards (SBIC) and HDFC Life (HDFL) exhibited negative Sharpe Ratios, indicating returns lower than the risk-free rate. The sector-wide comparison highlights that a few select firms outperformed NIFTYFIN in terms of risk-adjusted returns, whereas others failed to compensate for the risks undertaken. These findings provide valuable insights for investors and portfolio managers seeking to optimize financial sector investments. The study emphasizes the importance of risk-adjusted performance metrics in decision-making and underscores the role of Sharpe Ratios in evaluating investment attractiveness within the Indian financial services sector.