Title: Relationship of Shriram Finance Limited with Nifty 50.
Author: Sonali Sathe
Introduction: Shriram Finance Ltd (SFL), formerly, Shriram Transport Finance Company Ltd (STFC), a flagship company of the Shriram Group, is an asset financing non-banking finance company (NBFC). The company offers a range of financing solutions for all types of vehicles. It also provides deposits, small business financing for dealer funding, mutual funds etc. It was founded on 5 April 1974 by R. Thyagarajan, AVS Raja and T. Jayaraman and CEO is Yalamati Srinivasa Chakravarti
Objective: Calculation of Beta (the change in Shriram finance limited with respect to change in nifty) and it’s significance.
Literature Review:
1. This case study demonstrates how agency cost type 2 may lead to a conflict of interest between the promoters and the financial institutions. Proxy advisory firms further the cause of shareholder activism by addressing the dissonance so caused. They advise shareholders on the stance to be taken at the time of voting on important resolutions to be discussed in the General Body Meeting. This research case study explores how proxy advisory firms are playing an important role in promoting the cause of shareholder activism in the Indian context. It examines the role of a few Indian proxy advisory firms in foiling the attempt of Shriram Transport Finance Company (STFC) to re-appoint an independent director. Shareholder activism is relatively a less explored topic in academic research, especially in India. The authors, through this case study, wish to address this gap. The phenomenon studied in the case pertains to increased attention now being paid to reports of proxy advisory firms. Citing low attendance track record of a director in previous meeting, two Indian proxy advisory firms appealed to financial institutions to oppose the resolution to re-appoint him. Questioning his commitment and ability to devote time to the company affairs, they succeeded in thwarting the attempt of STFC to re-nominate Puneet Bhatia as director. The dilemma addressed in the case pertains to whether attendance in meeting can be a sole criterion for removing an independent director from the board. Secondary research among leading business publications unearthed major developments that have been captured in the case study. The case contributes to increasing the awareness of growing role of proxy advisory firms in India through a real example.
2. Mutual funds exhibit a very dynamic nature and play a vital role in the economy by helping to mobilise savings of small investors and channelising it to the capital markets thereby having short-run as well as long-term impact on the savings rate, the stock market and the national economy. Mutual funds have opened up new avenues to investors and also brought liquidity in the investment arena thereby being transformational to the financial system in India. This study attempts to measure the risk-return profile of select index funds, evaluate their performance and make a comparative analysis with the benchmark Nifty 50. Ten index mutual fund schemes of various asset management companies were considered for the study. Nifty 50 was considered as the benchmark since it is widely considered to be the best representative of the stock market performance in India. The findings may be useful for mutual fund houses, investors and other stakeholders.
Data Collection: Data was collected from yahoo finance historical data, then it was manipulated by finding the Friday closing price. After that weekly returns for nifty and Shriram Finance Limited was calculated which was written as X & Y. By doing regression through data analysis.
Data Analysis:
SRFL Returns (Y)= 0.244 + 1.13 Nifty Returns (X)
( 4.3544)
N= 51, R^2= 0.279, F= 18.960, Beta= 1.13
The above equation shows the relationship between X & Y. (+) sign means there is a direct relationship which implies that if X rises, Y also rises & vice versa. In this equation b=1.13, that is if X rises by 1 unit, demand (Y) will rise by 1.13 units. Hence b is statistically significant at 5% significance level.
R^2= 0.279, which means 27.9% of Y is explained by X, similarly F= 18.960 . Hence overall model is statistically significant at 5% Significance level.
Conclusion: since it can be seen that value of b (beta) is more than 1 which implies that Shriram Finance Limited is good for short term investment.
References:
Abhishek Sinha & Suresh Kerani, 2021. “Shriram Transport Finance Corporation Ltd: Do Proxy Advisors Really Protect Non-promoters’ Interests?,” South Asian Journal of Business and Management Cases, , vol. 10(3), pages 303-312, December.
Ainsley Granville Andre Jorge Bernard, 2021. “Index mutual fund schemes in India: a performance analysis,” International Journal of Business and Globalisation, Inderscience Enterprises Ltd, vol. 27(4), pages 505-512.