Relationship between Nifty and AUBANK
Author: Akash Verma
Introduction:
Introduction:
AU Small Finance Bank is a retail-focused Non-Banking Finance Company that became a bank in 2017 . It offers a wide range of banking services online, such as savings account, credit cards, fixed deposit, loan, and more. The bank has a deposit base of 37,014 Cr with 742 branches across India . It serves low and middle-income individuals and micro and small businesses that have limited or no access to formal banking and finance channels.
Objective:
To Calculate Beta(β) and its Significance.
Views/Reviews:
- Chairman of AU Small Finance Bank, Raj Vikash Verma: Amidst the scenario of gloom caused by the pandemic at the global level, I am proud to share with you all, that AU Bank remained undeterred in pursuit of its Goals and Objectives, ending the year on a strong positive note with substantial progress made during the FY 2020-21.
- Aamir Khan, a well-known Bollywood actor, has endorsed the bank’s brand campaign and praised the bank’s focus on making banking simpler for the average Indian.
Data Collection:
- Firstly, I visited the NSE website.
- Then, I clicked on the Historical Data option under the Data and Reports section.
- I downloaded the data of AU Small Finance Bank and Nifty 50 index from 01-Oct-2022 to 31-Sep-2023 in excel format.
- In the end, I sorted the data in excel for analysis.
Data Analysis:
The regression equation has the form:
Y = a + b*X
Where, Y is the dependent variable, X is the independent variable, a is the intercept, and b is the slope.
In our case, AU Small Finance Bank is the dependent variable and Nifty 50 is the independent variable.
Intercept, a = 0.161557720361836
Slope, b = 1.12002514683938
So, the regression equation is given by-
Y(AUBANK) = 0.161557720361836 + 1.12002514683938 * X(NIFTY)
The above equation shows us the relationship between AU Small Finance Bank and Nifty. The positive sign indicates that if Nifty rises then the price of AU shares will also rise and vice-versa. If Nifty rises by 100 points, then AU shares will rise by 112 points.
T-stat for b (Co-efficient of Nifty) is 2.9563 and the P-value is 0.0048 which means that the coefficient of Nifty is significant at the 0.05 level, as the p-value is less than 0.05. This implies that Nifty has 95% significant effect on AU Small Finance Bank, and they have a very strong relationship.
The number of observations is 49. R^2 is 0.1568 which indicates that the model only explains 15.68% of the variation in the price of AU Small Finance Bank. This means that the model is not a good fit for the data, and there are other factors that affect the price of AU Small Finance Bank more than the price of Nifty 50.
Conclusion:
Beta(β) for our Case is 1.12.
A beta of 1.12 for the above Nifty and AU Small Finance Bank regression model indicates that the price of AU Small Finance Bank is more volatile than the price of Nifty 50. It means that for every 1% change in the price of Nifty 50, the price of AU Small Finance Bank changes by 1.12%. It also means that AU Small Finance Bank has a higher risk and higher average return than Nifty 50.
References: