Title- Relationship of Axis Bank with Nifty 50
Author- Aditi Kathpalia
Introduction-
About Axis Bank-
Axis Bank is the third largest private sector bank in India offering an entire comprehensive spectrum of financial services to customer segments covering Large and Mid-Corporates, Micro, Small and Medium Enterprises (MSME), Agriculture and Retail Businesses.
Vision of Axis Bank-
To be the preferred financial solutions provider excelling in customer delivery through insight, empowered employees and the smart use of technology.
Business Segments-
Their various business segments are-
- Retail Banking
- Corporate credit
- Treasury
- Transaction Banking
- SME Business
Objectives of the report-
To calculate beta and find its significance
Views and Reviews-
Emkay Global said Axis Bank delivered healthy credit growth (ex-Citi) at 16 per cent YoY but lower loan yields and higher cost of funding led to a slight contraction in net interest margin, which stood at 4.2 oer cent. This coupled with higher opex led to a slight miss on core profitability, Emkay Global said but it added that LLP led to a beat on net profit (ex-Citi one-off).
“After a sharp dip in RoA to a low of 0.8 per cent due to the hit on Citi’s portfolio acquisition in FY23, we expect the bank to report 1.8 per cent RoA and 18 per cent RoE (inflated due to Citi’s acquisition goodwill w-off) on a merged basis (without factoring any equity dilution) over FY24-26E, owing to better growth and moderation in operational cost,” Emkay said while revising its target to Rs 1,225 on the stock.
Motilal Oswal Securities said Axis Bank delivered a stable performance, with earnings being driven by lower provisions and higher fee income, even as margin remained range-bound. Asset quality, it said, continued to improve with moderation in slippages and healthy trends in recoveries and upgrades.
“The restructured book was controlled, which coupled with a higher provisioning buffer provided comfort on credit cost. We tweak our estimates slightly and expect Axis Bank to deliver an RoA/RoE of 1.9 per cent/18.1 per cent in FY25. Reiterate BUY with a target price of Rs 1,100 (premised on 1.8 times September 2024E BV),” Motial Oswal said.
Data Collection-
In order to analyze the relationship between Axis Bank and Nifty 50’s performance, data on their weekly closing prices was collected from the NSE India website for the period between December 1st, 2022, and November 30th, 2023. I specifically focused on Fridays, capturing a snapshot of their weekly performance. Subsequently, returns were calculated for both Axis Bank and Nifty 50 by expressing the change in their weekly closing prices as a percentage of the previous week’s value. Finally, a regression analysis was conducted to investigate how the returns of Axis Bank (dependent variable, y) are influenced by the returns of Nifty 50 (independent variable, x). This approach allows us to quantify the extent to which Axis Bank’s performance is linked to the broader market movement represented by Nifty 50.
Data Analysis-
The mathematical relationship between Axis Bank’s returns (Y) and Nifty 50’s returns (X) is expressed as:
Return of Axis Bank = -0.194 + 0.005 * (Return on Nifty 50)
(t stat- 0.02047)
Number of Observations (N): 49
R-Square: 0.00000891
F-Statistic: 0.000419
P-Value: 0.983755
Interpretation-
The above equation shows the relationship between return of nifty 50 index and return of axis bank. Return of Axis Bank being the dependent variable and Return of Nifty 50 index being the independent variable. Positive sign means if nifty 50 index rises, Axis bank share also rises. If Nifty 50 rises by 1 unit or 1 rupee, Axis bank share will rise by 0.005 units and vice-versa. Number of observations are 49. Figure in bracket 0.02047 is t-stat for b. The p value for this is 0.983755 which means income is Nifty 50 is statistically insignificant at 5 % level. R square is 0.00000891 which means 0% variance in return on Axis bank share is explained by return of Nifty 50. F is 0.000419. P value for this is 0.983755 which means overall the model is statistically insignificant at 5% level.
Conclusion-
As beta is less than 1, It is good for long term investment.
References-
https://www.nseindia.com/reports-indices-historical-index-data