Fundamental Analysis: Evidence from India
Rastogi, K (2025) Fundamental Analysis: Evidence from India. Dissertation thesis, Indian School of Business.
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Abstract
This paper investigates whether fundamental analysis using accounting numbers can generate abnormal returns in the Indian stock market, focusing on both high and low book-to-market firms. Drawing on Piotroski [2000], the study constructs fundamental signals from financial statements to distinguish winners from losers. Using firm-level data from the Prowess database for 2013–2022, the findings reveal that the portfolios based on strong fundamental signals earn a mean market-adjusted buy and hold return of 17.6%, while a long–short strategy between winners and losers yields a mean market-adjusted buy and hold return of 14.2%. Employing Fama–MacBeth regressions, the analysis shows that each one-point increase in F-SCORE is associated with a 3.7% increase in one-year market-adjusted buy and hold returns. The return premium remains robust after controlling size, book-to-market and market beta. Further analysis shows that the return predictability weakens for firms with higher institutional ownership and multinational status but strengthens for smaller firms facing greater information asymmetry. These results highlight market inefficiencies and suggest that Indian markets underreact to fundamental signals. The study contributes to the literature by demonstrating the predictive power of fundamental analysis in an emerging market with distinct institutional structures, regulatory frameworks, and accounting standards.
Item Type: | Thesis (Dissertation) |
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Subjects: | Finance |
Date Deposited: | 06 Oct 2025 16:11 |
Last Modified: | 06 Oct 2025 16:11 |
URI: | https://eprints.exchange.isb.edu/id/eprint/2415 |