Relationship between Nifty and Axis Bank
Author: Aryan Dakhera
Batch: F3
Roll No: 21230023762
Introduction:
Axis Bank Limited, formerly known as UTI Bank (1993–2007), is an Indian banking and financial Services company headquartered in Mumbai, Maharashtra. It is India’s third largest private sector bank by assets and fourth largest by Market capitalisation. It sells financial services to large and mid-size companies, SMEs, and retail businesses.
Objective:
To Calculate Beta(β) and its Significance.
Views/Reviews:
- Nuvama Institutional Equities, which has a target of Rs 1,100 on the stock, said Axis Bank’s missed NII consensus by 3 per cent, but was quick to note that the consensus was for standalone NII while reported NII was consolidated and considered Citi acquisition for one month.
“The Citi acquisition has enabled the bank to become a “premium customer” franchise in cards and wealth. We reiterate ‘BUY’ (target price Rs 1,130) as we believe the efforts made by management over the last five years would continue to pay off in the longer term even if there is some short-term earnings volatility,”
- 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).
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 Axis Bank Limited and Nifty 50 index from 01-Oct-2022 to 30-Sept-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, Axis Bank is the dependent variable and Nifty 50 is the independent variable.
Intercept, a = 0.0049
Slope, b = 0.7386
So, the regression equation is given by-
Y (Axis Bank) = 0.0049 + 0.7386*X (Nifty)
The above equation shows us the relationship between Axis Bank and Nifty. The positive sign indicates that if Nifty rises then the price of Axis Bank shares will also rise and vice-versa. If Nifty rises by 100 points, then Axis Bank shares will rise by 73.86.
T-stat for b (Co-efficient of Nifty) is 2.573 and the P-value is 0.013 which means that the coefficient of Nifty is significant at the 0.05 level, as the p-value is lesser than 0.05. This implies that Nifty has significant effect on Axis Bank, and the relationship between them is strong.
The number of observations is 49. R^2 is 0.123 which indicates that the model only explains 12.3% of the variation in the price of Axis Bank. This means that the model is very good for the data, and there are no other factors that affect the price of Axis bank.
Conclusion:
Beta(β) for our Case is 0.7386.
A beta of 0.7386 for the above Nifty and Axis Bank regression model indicates that the price of Axis Bank is less volatile than the price of Nifty 50. It means that for every 1% change in the price of Nifty 50, the price of Axis Bank changes by 0.73%. It also means that Axis Bank has a lower risk and a lower expected return than Nifty 50.
References:
- https://www.nseindia.com/reports-indices-historical-index-data
- https://www.nseindia.com/get-quotes/equity?symbol=AXISBANK
- https://www.businesstoday.in/markets/company-stock/story/axis-bank-analyst-day-key-takeaways-share-price-targets-more-406951-2023-11-24