Relationship between Nifty 50 and Kotak Mahindra Bank
Author – Khushboo Budhrani
Introduction: Established in 1985, Kotak Mahindra group is one of India’s leading financial services conglomerates. It was promoted by Mr. Uday Kotak. In February 2003, Kotak Mahindra Finance Ltd. (KMFL), the group’s flagship company, received banking license from the Reserve Bank of India (RBI), becoming the first non-banking finance company in India to convert into a bank – Kotak Mahindra Bank Ltd. (KMBL). It offers banking products and financial services for corporate and retail customers in the areas of personal finance, investment banking, life insurance, and wealth management.
Objective: To find out Beta and its significance.
Views & Reviews:
Paytm founder and CEO Vijay Shekhar Sharma on 24 December 2023, equated the founder of Kotak Mahindra Bank, Uday Kotak, to the CEO of banking giant JP Morgan, Jamie Dimon quoting him as “True Legend of Indian Banking”.
Kotak Mahindra Bank has TTM P/E ratio 20.08 as compared to the sector P/E of 8.89. There are 34 analysts who have initiated coverage on Kotak Mahindra Bank. There are 9 analysts who have given it a strong buy rating & 6 analysts have given it a buy rating. 3 analysts have given the stock a sell rating.
Data Collection: The closing prices of equity were collected from NSE India Index and Kotak Mahindra Bank for the period 01/10/2022 to 30/09/2023 considering their weekly close rates calculated the returns and formed the regression analysis.
Data Analysis:
The regression equation is as follows-
Y= 0.396006 + 1.064777X
The above equation shows us the relationship between weekly returns of Nifty 50 and weekly returns of Kotak Mahindra Bank.
The Weekly returns of Nifty 50 is independent variable, and the weekly returns of Kotak Mahindra Bank is dependent variable. The positive sign shows that if weekly returns of Nifty 50 rises, weekly returns of Kotak Mahindra Bank also rises and vice versa.
It implies that if the weekly returns of Nifty 50 (X) increase by 1 unit, the weekly returns of Kotak Mahindra Bank (Y) is expected to increase by approximately 1.064777 units.
The number of observations is 49 and R square is 0.369498, which means 37% of weekly returns of Kotak Mahindra Bank depends upon weekly returns of Nifty 50. In other words, 63% is error which may be due to other variables which are not taken in the model.
F is 27.54383 and P-value is 0.00 which means that the overall model is statistically significant at 1% level.
Conclusion:
Since the Beta is more than 1, It is more volatile than the market and hence, Kotak Mahindra Bank is good for short term investment.
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