Relationship of Nifty with State Bank of India
Author Name: Sakshi Kakad ( roll no 27)
Introduction
The State Bank of India is an essential institution in India’s banking landscape. Its role as the largest public sector bank with extensive reach and government backing gives it a unique position in the market. Despite facing challenges such as NPAs and competition from private banks, SBI’s stability, government support, and growth in digital banking offer promising prospects for the future. As a major component of the Nifty 50, the performance of SBI’s stock has substantial implications for the broader market, and its future performance will continue to be a key barometer of India’s financial sector health.
Objective
The objective of this study is to determine the beta value of State Bank of India relative to the Nifty 50 index. Beta measures the stock’s volatility compared to the market. This analysis will help investors assess the risk associated with State Bank of India stock and make informed investment decisions.
Literature Review
1.Macroeconomic Factors and SBI’s Stock Price
Raghunathan (2017), interest rates have a direct influence on the bank’s lending portfolio and profitability. When interest rates decrease, demand for loans increases, potentially raising the bank’s earnings, which in turn could push up its stock price. Raghunathan (2017) asserts that this increase in earnings may correlate positively with SBI’s movements in the Nifty index.
2.Government Policies and SBI’s Market Movements
Sharma and Soni (2018) note that policy shifts such as capital infusions from the Indian government or regulatory reforms can stabilize investor sentiment and improve the bank’s financial standing. In their study, they emphasize that capital infusion programs typically lead to an increase in stock prices due to the enhanced capital adequacy ratio of SBI.
Reference
1.Raghunathan, R. (2017). Impact of Macroeconomic Variables on the Stock Performance of Indian Public Sector Banks. Journal of Financial Studies, 25(3), 56-68.
2.Sharma, M., & Soni, A. (2018). Government Capital Infusions and Bank Stock Performance: Evidence from SBI. Economic and Political Weekly, 53(32), 45-57.
Data Collection
Data for State Bank of India and Nifty 50 was downloaded for the period from 1st January 2024 to 31st December 2024. The data was manipulated to calculate the Friday closing prices for both indices. The Nifty 50 was represented as X and State Bank of India as Y. A linear regression analysis was performed where Y was regressed on X.
Data Analysis
SUMMARY OUTPUT
Regression Statistics
Multiple R
0.429813176
R Square
0.184739366
Adjusted R Square
0.166622463
Standard Error
0.028570982
Observations
47
ANOVA
Df
SS
MS
F
Significance F
Regression
1
0.008324
0.00832388
10.19707
0.002568254
Residual
45
0.036734
0.000816301
Total
46
0.045057
Coefficients
Standard Error
t Stat
P-value
Lower 95%
Upper 95%
Lower 95.0%
Upper 95.0%
Intercept
0.003448751
0.004202
0.820814678
0.416079
-0.005013745
0.011911247
-0.005013745
0.011911247
X Variable 1
0.810683565
0.253871
3.193285474
0.002568
0.2993605
1.322006629
0.2993605
1.322006629
Conclusion:
Since the Beta (0.8106) is less than 1, it indicates that State Bank of India is preferrable for long term investment.
