Author: Shraddha Bhusari
F1, 021330024391, ITM B-School Navi Mumbai.
Introductions:
Shriram Finance Ltd. is a leading Indian financial services company offering home loans, personal loans, vehicle finance, and insurance. Founded in 1979, it has grown steadily, expanding operations across India. Recent news includes continued growth in lending, new market expansion, and technology-driven customer experience enhancements.
Objective:
To find out Beta of Shriram Finance Ltd. & its significance.
Data Collection:
Data of Shriram Finance Ltd. & Nifty 50 was downloaded from NSE website from the date 01/05/2023 to 30/04/2024. This data is then manipulated to get Friday closing prices. weekly returns of nifty 50 are taken as X & weekly returns of Shriram Finance Ltd. are taken as Y. Weekly returns of nifty 50 and Shriram Finance Ltd. were calculated. Weekly returns of Shriram Finance Ltd. were regressed on the weekly returns of Nifty 50.
Data Analysis:
Weekly returns of Shriram Finance Ltd. = (-1.1579) + (-0.2051) Weekly returns of Nifty 50
T-stat = (-0.4875)
N = 48 , R2=0.0051 , F = 2.3976 , P Value = 0. 6282.
Interpretation:
The above equation depicts the relationship between weekly returns of Shriram Finance Ltd. & weekly returns of Nifty 50. The minus sign before the coefficient of Nifty 50 tells us that changes in the Nifty 50 index do not have a significant or meaningful impact on Shriram Finance Ltd.’s performance. If the Nifty 50 rises by 1 unit, we would expect Shriram Finance Ltd.’s performance to decrease by 0.2051 units, holding all other factors constant. However, this relationship is not statistically significant, as indicated by the t-stat value of -0.4875 and p-value of 0.6282. The value of T-stat is for β & the P-value for which is 0.6282 which is more than 0.05 meaning β is statistically insignificant. R-squared is very low at 0.51%, which means that the Nifty 50 index explains only a tiny bit of how Shriram Finance Ltd. does. The overall regression model is not statistically significant, as indicated by the F-statistic of 2.3976 and p-value of 0.6282, suggesting that the Nifty 50 index variable does not have a significant impact on the Shriram Finance Ltd.’s performance variable.
Conclusion:
As the β is negative for Shriram Finance Ltd. Investment in this company should be avoided.