Relationship between Kotak Bank with Nifty50
Author: kajal sonwale roll no 55, div A
Introduction:
Kotak Mahindra Bank Limited is one of the leading Indian private sector banks, headquartered in Mumbai. Established in 1985, it has grown to become one of the most trusted banks in India, offering a wide range of financial services. Kotak Bank operates through numerous branches and ATMs across the country, with a strong focus on customer-centric services and innovation.
Objective:
To find the Beta (β) of Kotak Bank and its significance.
Data Collection:
Nifty 50 data and Kotak Bank data were collected from Nseindia.com for the period starting from 1st January 2024 to 31st December 2024. The historical data collected was calculated 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 the use of regression analysis, weekly returns of Kotak Bank were regressed on weekly returns of Nifty 50 index.
Data Analysis:
Format of regression equation is:
Y = α + β(X)
Kotak Bank share = -0.1999 + 0.6305x
The above equation shows the relationship between Kotak Bank and Nifty 50. The positive sign indicates a direct relationship — if weekly return of Nifty 50 rises, Kotak Bank’s returns are also likely to rise. If Nifty 50 increases by 1 unit, Kotak Bank’s return is expected to increase by 0.6305 units.
Statistical Significance:
Significance in statistics tells us whether the relationship we observe is real or just happened by chance. If the result is statistically significant, it means the relationship between the two variables is meaningful and not due to random variation.
1. T-statistic for β = 2.247
– The T-statistic measures how strongly the independent variable (Nifty 50 returns) is related to the dependent variable (Kotak Bank returns).
– A higher T-statistic means a stronger relationship.
– Since the T-statistic is greater than the threshold, we can conclude that the relationship between Nifty 50 and Kotak Bank is statistically significant.
2. P-value for β = 0.030
– The P-value tests the null hypothesis that the coefficient (β) is zero — meaning no relationship exists between Nifty 50 and Kotak Bank’s returns.
– A P-value less than 0.05 means that the relationship is statistically significant at the 5% level.
– Since the P-value is 0.030, it confirms that Nifty 50’s returns have a meaningful and significant impact on Kotak Bank’s returns.
3. R-squared = 0.105
– R-squared measures how much of the variation in Kotak Bank’s returns is explained by Nifty 50’s returns.
– An R-squared value of 0.105 means that 10.5% of the changes in Kotak Bank’s returns can be explained by changes in Nifty 50.
4. F-statistic = 5.049 (P-value = 0.0298)
– The F-statistic tests whether the overall regression model is statistically significant.
– The P-value for the F-statistic is 0.0298, confirming that the overall model is statistically significant.
Conclusion:
- Since β = 0.6305, which is less than 1, Kotak Bank is less volatile than the market. The positive β value indicates that Kotak Bank’s returns tend to move in the same direction as Nifty 50’s returns. The statistically significant T-statistic, P-value, and F-statistic confirm that the relationship between Kotak Bank and Nifty 50 is real and meaningful — not due to random variation. Therefore, Kotak Bank can be considered a moderate-risk investment suitable for long-term investors looking for stable returns.