Relationship of Nifty 50 Index with Max Financial Service Limited

Relationship of Nifty 50 Index with Max Financial Service Limited

Author: Mujeem Khan

 

Introduction:

The Company is primarily engaged in the business of making and holding investments in its subsidiary, Max Life Insurance Company Limited and providing management advisory services to Group Companies in India. Max Financial Services (MFS) is the listed holding company for Max Life Insurance Company and was formed soon after the demerger of Max India Limited. In January 2016, the Max Group concluded a mega corporate restructuring wherein the erstwhile Max India was demerged into three separate entities, Max Financial Services (life insurance), Max India (healthcare and allied businesses) and Max Ventures & Industries (manufacturing industries and new entrepreneurial ventures). The original company was renamed Max Financial Services and the ex-demerger stock of MFS started trading from 27 January 2016.

 

Objective: To find Beta (β) of Max Financial Service Limitedand its significance

 

Data Collection:

Nifty 50 Index and Max Financial Service Limited data was collected from nseindia.com website for the period of one year dating from 1st February 2023 to 31st January 2024. The historical data collected was manipulated using Microsoft Excel to get Friday closing prices of both, the index and the company. Weekly returns were based on the closing prices were calculated using Excel tools and with use of Regression analysis, weekly returns of Max Financial Service Limited were regressed on weekly returns of Nifty 50 Index.

 

Data Analysis:

Equation of regression of weekly returns of Max Financial Service Limited on weekly returns of Nifty 50 Index-

Format of Regression equation is Y = α + β(X)

weekly returns of Max Financial Service Limited =-0.427575712 + 0.01100108 × weekly returns of Nifty 50 Index                                                                                        

(0.03164985)

Where,

Number of Observations = 48,

R Square = 0.000021775,

F = 0.0010017131,

P-value = 0.97488821

 

 

 

Interpretation-

• The above equation shows relationship between weekly returns of Max Financial Service Limited Company and weekly returns of Nifty 50 Index.
• Negative sign means inverse relation, meaning if weekly returns of Nifty 50 Index rise then weekly returns of Max Financial Service Limited Company falls and vice-versa.
• If weekly returns of Nifty 50 Index rise by 1-unit, weekly returns of Max Financial Service Limited Company will fall by 0.01100108 unit and vice-versa.
• Figure in bracket shows t-stat for β, P-value for which is0.97488821, which is less than 0.05 meaning β is notstatistically significant at 5% significance level.
• Number of Observations are 48, R-square value is0.000021775 meaning approximately 0.002% of weekly returns of Max Financial Service Limited are explained by weekly returns of Nifty 50 Index. Balance 99.998% (approximate) is error due to other variables which are not in the model.
• F is 0.0010017131, the P-value of which is 0.97488821, which is less than 0.05 meaning overall, the model is not statistically significant at 5% significance level.

 

Conclusion:

As β (0.01100108) is less than 1, it is good to invest in Max Financial Service Limited for long term.

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