The present study attempts to analyze performance of twenty six (26) Public Sector Banks (PSBs) in respect of their exposure to Indian capital market. Further, it is also tried to test the Efficient Market Hypothesis (EMH) relating to stocks of sample banks during 2009-10 to 2013-14. In order to obtain the objectives, relevant secondary data have been compiled from the data base of Bombay Stock Exchange and annual reports of the respective banks. The study concludes that there is a significant variation across the sample banks in terms of selected measure of exposures except exposures relating to bridge loans to companies against expected equity flows/issues and underwriting commitments in primary issue of shares or convertible bonds or convertible debentures or units of equity oriented mutual funds. Further, the testing of weak form of EMH concludes that, Indian capital market comprising of sample PSBs stock is efficient.

KEY WORDS: Public Sector Banks, Exposure, Efficient Market Hypothesis