Relationship of SBI Life Insurance with Nifty 50
Author: Sarah Khan, MMS-89
Introduction to SBI Life Insurance
SBI Life Insurance is one of India’s leading life insurance companies, providing a variety of insurance and investment products. Established as a joint venture between the State Bank of India (SBI) and BNP Paribas Cardif, SBI Life has grown significantly in the Indian financial market. Its performance in the stock market is influenced by factors such as economic trends, interest rates, and overall market conditions.
Objective
The objective of this study is to determine the beta value of SBI Life Insurance 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 SBI Life’s stock and make informed investment decisions.
Literature Review
1. A study by Sharma and Verma (2023) analyzed the relationship between financial sector stocks and market indices. It found that insurance companies tend to have moderate volatility compared to other financial sector stocks due to their long-term business models.
2. According to a report by Economic Times (2024), SBI Life’s stock performance is influenced by interest rate changes, regulatory policies, and economic growth. The analysis indicated a moderate correlation between SBI Life and the Nifty 50 index.
Data Collection
Data for SBI Life Insurance 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 SBI Life Insurance as Y. A linear regression analysis was performed where Y was regressed on X.
Data Analysis
Y = a + bX
Regression Equation:
SBI Life Insurance = 0.0025 + 1.15(Nifty 50)
N = 47
R² = 0.612, F = 24.721
The above equation shows the relationship between SBI Life Insurance and the Nifty 50 index.
SBI Life is a dependent variable, and Nifty 50 is an independent variable.
– Positive Beta (1.15) means SBI Life has a direct relationship with Nifty 50. If the Nifty 50 index rises, SBI Life’s stock price also rises and vice versa.
– If Nifty 50 increases by 1 unit, SBI Life is expected to increase by 1.15 units.
– T-stat is 4.971, and the p-value for this is 0.0001, which is less than 0.05, meaning Nifty 50 is statistically significant at the 5% level.
– N = 47 meaning number of observations are 47.
– R² = 0.612, which means 61.2% of SBI Life’s movement is explained by Nifty 50.
– Balance 38.8% is the error due to other variables which are not in the model.
– F = 24.721, and the p-value (or significance value) is 0.0001, which is less than 0.05, meaning overall the model is statistically significant at the 5% level.
Conclusion
Since the Beta (1.15) is greater than 1, it indicates that SBI Life Insurance is slightly more volatile than the overall market. This means that SBI Life Insurance could be considered for short-term investments as it has higher market sensitivity.
References
1. Sharma, R., & Verma, S. (2023). Market volatility in financial sector stocks: A comparative study. Journal of Finance and Investment, 18(3), 112-129.
2. Economic Times. (2024). SBI Life Insurance stock trends: Impact of interest rates and market movements.