Title: Calculation of Beta of HDFC Bank Limited and its significance
Author: Harsh Mori
Introduction: HDFC Bank Limited (also known as HDB) is an Indian banking and financial services company headquartered in Mumbai. It is India’s largest private sector bank by assets and world’s 10th largest bank by market capitalization as of April 2021. It is the third largest company by market capitalization of $127.16 billion on the Indian stock exchanges. It is also the fifteenth largest employer in India with nearly 150,000 employees
Objective: To calculate Beta of HDFC Bank limited and its significance.
Data Collection: Data of HDFC Bank Limited from 01-12-2021 to 30-11-2022 from NSE website
• Friday weekly closing prices has been found out
• Weekly Return have been calculated with the formula of (Y2-Y1)/Y1*100
• Weekly Return of Equity have been regressed on Weekly Return of Nifty
Data Analysis:
Weekly return of HDFC Bank Limited = 0.0001213 +0.0155314 Weekly return of nifty +E
• t-stat = 0.0747151297970622
• R2 = 0.000121340
• F = 0.00558235062057946
• N = 49
• The above equation tells us about the relationship between Weekly Return of HDFC Bank and Weekly Return of Nifty. The positive sign means that there is a direct relationship. If nifty rises, equity rises and if nifty falls, equity falls. The co-efficient of weekly return of nifty is -1.107, which means if nifty rises by 1 unit, HDFC Bank Ltd. equity will decrease by -1.107 units and vice versa.
• Number of Observations are 49 and t-stat is 0.0747151297970622.
• P value is 0.940765349492412, which is greater than 0.05, means that b is not statistically significant at 5%.
• R2 is 0.000121340, which means that 0.012% of Y (HDFC Bank) is explained by X (nifty), balance of 99.988% is error. Error is due to the variables which are not in the model.
• F is 0.00558235062, the P value for which is 0.940765349492412 > 0.01, means overall the model is statistically not significant.
Conclusion:
Since b = -1.107 is less than 1, it is statistically not significant.
HDFC Bank Ltd. is not good option for investment because for every increase in nifty there will a decrease in the equity of HDFC Bank ltd.