Relationship between Nifty 50 and SBI

Author: Shivam Srivastava

Introduction: State Bank of India (SBI) is the largest banking and financial services company in India. It’s a public sector bank so 57.6% of the shares is owned by the Government of India. It offers a wide range of products and services, including savings and current accounts, loans, credit cards, investments, and insurance. It has operations in over 30 countries.

Objective: The objective is to determine the value of ß (Beta) which is the coefficient of variable X, which denotes the relationship between dependent variable (SBI) and independent variable (Nifty 50).

Views and reviews:

  1. By 2023, SBI will be nearer 15% ROE, rate hikes to boost NIMs: Dinesh Kumar Khara, Chairman SBI. “Inflation is a function of multiple variables, and a major component is fuel-led inflation and also the edible oil-led inflation both of which are essentially on account of the imports which we are having. Going forward, how these two very important factors behave will probably give the trajectory for inflation.”
  2. On Friday, SBI reported a 41.27 per cent jump in standalone net profit for the quarter ending March at Rs 9,113.53 crore, up from Rs 6,450.75 crore in the same quarter a year ago. There was double digit loan growth, coming at 11%, it is a positive surprise, being above industry trend,” says Saurabh Jain, Assistant Vice President – Research (Retail Equities), SMC Global Securities

Data collection: There are two parts in the data collection:

  1. Collecting the historical data of Nifty50 from the website of NSE India from 01/10/2022 to 30/09/2023. After collection of the entire data of the given period only the data of Friday’s are taken by sorting the whole data. According to the closing data of Nifty 50 of the period, return values are collected using the formula of return.
  2. Collecting the historical data of equity (State Bank of India) from the website of NSE India from 01/10/2022 to 30/09/2023. After collection of the entire data of the given period only the data of Friday’s are taken by sorting the whole data. According to the closing data of Nifty 50 of the period, return values are collected using the formula of return.

Data analysis:
Correlation = 0.15
Nifty 50 (X) = Independent Variable
Sbi (Y) = Dependent Variable
Sbi = -0.2903 + 0.3684(Nifty 50)
                         1.0685
N= 49, Square of R = 0.0237, F = 1.142, P value = 0.290
The above equation shows us the relationship between Nifty 50 and SBI. SBI is the dependent variable and Nifty 50 is the independent variable. The positive sign shows there is a positive relation between them and that if Nifty 50 rises SBI also rises and vice versa.

If Nifty 50 rises by ₹1, SBI will also increase by 36p.
t-state for B (Coefficient of Nifty) is 1.068 and the P value is 0.29 which means Nifty is not statistically significant for SBI at 1% level.
 Number of observations are 49
 R square is 0.0237
 which means 2.37% of SBI increase rate is dependent on nifty 50’s.
 In other words 97.63% is error which may be due to other variables we are not been taken in the model.
 F is 1.142 and the p value is 0.290 which means overall the model is not statistically significant at 1% level.

Conclusion: Beta is -0.2903 is less than 1, which means Britannia is good for long term investment.

References:

  1. Khara, D. K. (2023, May 11). By 2023, SBI will be nearer 15% RoE; rate hikes to boost NIMs: Dinesh Kumar Khara. The Economic Times1
  2. Jain, S. (2023, May 11). SBI asset quality has improved, loan growth in double digits: Saurabh Jain. The Economic Times2
  3. National Stock Exchange of India. (n.d.). Reports & Indices – Historical Index Data. Retrieved December 25, 2023, from https://www.nseindia.com/reports-indices-historical-index-data 3
  4. National Stock Exchange of India. (n.d.). SBIN – State Bank of India. Retrieved December 25, 2023, from https://www.nseindia.com/get-quotes/equity?symbol=SBIN 4

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