Introduction:

In Financial Markets biggest problem is to invest in good firm which yields good return. All the Assets whether financial or real can be valued, but it differs from case to case. Role of Valuation plays a limited role for a Passive investor. But for an Active investor valuations are very important. There are different techniques through which analysts value equities. Some Analysts use Discounted Cash flow (DCF) model to value. Some Analyst use multiples such as the Price to Earnings (P/E) and Price to Book ratios to value stocks. Technical analysts believe that prices are driven as much by investor psychology as by any underlying financial variables. Information Traders try to trade in advance of new information and buy at good news and sell at bad news. Efficient marketers believe that the market price at any point in time represents the best estimate of the true value of the firm. Value of company is a relatively informal term, which is typically used to determine the financial health and welfare of a firm in the long run. Shareholder value maximization is the main objective of any company (in theory). According to this concept, Valuation of any firm is an estimation of its market value in terms of money on certain date, taking in to account of aggregate risk, time and income expectations. Banks, insurance companies and other financial service firms pose special challenges for an analyst attempting to value them, for three reasons. The first is the nature of their businesses makes it difficult to define both debt and reinvestment, making the estimation of cash flows much more difficult. The second is that they tend to be heavily regulated and changes in regulatory requirements can have significant effect on value. The third is that the accounting rules that govern bank accounting have historically been very different from the accounting rules for other firms, with assets being marked to market more frequently for financial service firms. In this study, our focus is to build a Banking industry specific model which will give fair valuation of any bank which will help the investors in making rational decisions. Our focus of the study is limited to Indian commercial banks. Objectives: To