Relationship of Nifty50 index with Shriram Finance Limited.
Author: Sushant Shashikant Borge
Introduction:
Shriram Transport Finance Company Ltd is a part of the SHRIRAM Group conglomerate which has a significant presence in the financing business. STFC is engaged In the business of commercial vehicle financing mainly focusing on trucks from preowned to new ones. It’s a Deposit-taking NBFC comprising 1,758 branches, 831 rural centers, and partnerships with ~500 private financiers.
Objective: To find Beta(β) of and Shriram Finance Limited its significance.
Data collection:
Nifty 50 data was collected from Nseindia.com and Shriram Finance Limited data also collected from Nseindia.com for the period starting from 1 March 2023 to 28 February 2024.The historical data collected was manipulated using Microsoft excel to get Friday closing prices for both, the index and the company. Weekly returns were based on the closing prices which were calculated using excel tools and with use of regression analysis ,weekly returns of Shriram Finance Limited were regressed on weekly returns of nifty 50 index.
Data analysis:
Format of regression equation is Y= α + β(X)
Equation of regression of weekly returns of Shriram Finance Limited on weekly returns of nifty50 index –
Weekly returns of Shriram Finance Limited = -1.26211+ 0.257989* weekly returns of nifty50 index
(0.705961)
Where,
Number of observations: 48,
R square =0.010718,
F =0.498382,
P-value = 0.018704
Interpretation:
- The above equation shows relationship between weekly returns of Shriram Finance Limited Company and weekly returns of Nifty 50 Index.
- Positive sign means direct relation, meaning if weekly returns of Nifty 50 Index rise then weekly returns of Shriram Finance Limited Company also rises and vice-versa.
- If weekly returns of Nifty 50 Index rise by 1-unit, weekly returns of Shriram Finance Limited Company will rise by 0.257989 unit and vice-versa.
- Figure in bracket shows t-stat for β, P-value for which is 0.018704, which is smaller than 0.05 meaning β is statistically significant at 5% significance level.
- Number of Observations are 48, R-square value is 0.010718 meaning approximately 1.0718 % of weekly returns of Shriram Finance Limited Company are explained by weekly returns of Nifty 50 Index. Balance 98.92 (approximate) is error due to other variables which are not in the model.
- F is 0.498382, the P-value of which is 0.018704, which is less than 0.05 meaning overall, the model is statistically significant at 5% significance level.
Conclusion:
As β (0.257989) is less than 1, it is good to invest in Shriram Finance Limited for long term.