Applicability of Capital Asset Pricing Model: Evidence from Selected Sector in Indian Stock Market

Valuation of Security is very important and essential for the investors who want to invest in capital market, it can be said the first to enter the stock market, which gives an investor the confidence to yield the expected return if analysis has been done accurately. Valuation of securities proves that why and what factors can make an investor to take decision for investing in India. From the rapidly growth sector like Health care which earns a maximum revenue from the export earnings and continuous gradation is done which contribute to the growth of the Indian economy. This study investigates a risk-return relationship within the CAPM framework in Indian Stock Exchange. Capital Asset Pricing model (CAPM) is widely researched, tested , and paradoxically both generally accepted and rejected model of asset pricing. On the whole, the CAPM model could satisfactorily explain the risk-return relationship in the Indian Stock market. The CAPM model was employed to identify whether selected health care securities are underpriced or overpriced.