Paper Details

Name: Karthikeyan L & Muruganandam D
Country: India

Year: 2026
Volume: Volume No: 13, Issue: 1, Year: 2026
Page Number: 101-109
DOI: https://doi.org/10.5281/zenodo.19368729

ABSTRACT
This study examines the relationship between key financial ratios and stock returns of 20
companies listed on the National Stock Exchange (NSE) of India, drawn from the automotive and industrial sector, over the period 2019 to 2023. The financial ratios investigated include Return on Assets (ROA), Return on Equity (ROE), Earnings Per Share (EPS), Debt-to-Equity Ratio (DER), and Price-to-Earnings Ratio (PE). Using a panel dataset of 100 firm-year observations, the study employs Pearson correlation analysis and multiple linear regression to identify the predictors of annual stock returns. The regression model yielded an R² of 0.50 and an adjusted R² of 0.47, indicating that approximately half the variation in stock returns is explained by the selected ratios. Results show that ROE (β = 1.864, p = 0.050) and PE ratio (β = 0.842, p =0.010) have statistically significant positive effects on stock returns, while DER exhibits a significant positive coefficient largely driven by recovery dynamics in highly leveraged companies. ROA demonstrates a marginally significant positive correlation (r = 0.173, p = 0.085), while EPS shows no significant relationship. These findings are consistent with signaling
theory and contribute to the growing body of evidence on fundamental analysis in emerging markets, specifically the Indian capital market.

Keywords: Financial ratios, stock returns, ROE, PE ratio, India, NSE, automotive sector,
emerging markets