Relationship of Nifty with Apollo Hospital Enterprise Limited
Author: Anshika Singh
Introduction
Apollo Hospital Enterprise Limited is one of India’s leading healthcare providers, offering multi-specialty medical services. Founded in 1983, the company has a strong presence in hospital chains, diagnostics, and pharmacy services. It is known for its cutting-edge medical facilities and commitment to patient care.
Objective
The objective of this study is to determine the beta value of Apollo Hospital Enterprise Limited 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 Apollo’s stock and make informed investment decisions.
Literature Review
1. Roll (1977) argues that the Capital Asset Pricing Model (CAPM) has limitations due to the difficulty of identifying the true market portfolio. The study suggests that beta may not be the only reliable measure of risk.
2. Jegadeesh & Titman (1993) find that stock returns are influenced by momentum strategies, meaning past winners continue to perform well. This contradicts CAPM’s assumption that only beta determines returns.
Data Collection
Data for Apollo Hospital Enterprise Limited 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 Apollo Hospitals as Y. A linear regression analysis was performed where Y was regressed on X.
Data Analysis
The regression analysis examines the relationship between Apollo Hospital Enterprise Limited’s stock price (Y) and the Nifty 50 index (X). Here’s what the result shows:
1. Strength of the Relationship
– R-Square: 0.1584 (15.84%) → Only 15.84% of Apollo’s stock movement is explained by Nifty 50.
– Multiple R: 0.3979 → This shows a weak positive relationship.
2. Statistical Significance
– P-Value for X Variable 1: 0.0056 → Since 0.0056 < 0.05, the relationship is statistically significant.
3. Impact of Nifty on Apollo Hospitals
– Intercept: 0.3813 → If Nifty = 0 (hypothetically), Apollo’s stock would start around 0.3813.
– X Variable 1 (Beta): 0.7651 → For every 1% increase in Nifty, Apollo’s stock increases by 0.7651% on average.
– Since Beta < 1, Apollo’s stock is less volatile than Nifty 50.
4. Regression Equation
Y = 0.3813 + 0.7651X
Conclusion
Since the Beta (0.7651) is less than 1, it indicates that Apollo Hospital Enterprise Limited is a relatively stable stock compared to Nifty 50. It is preferable for long-term investments as it carries lower market risk and is less volatile. Investors should consider other factors besides Nifty movements when making investment decisions.
References
1. Roll, R. (1977). A Critique of the Asset Pricing Theory’s Tests. Journal of Financial Economics, 4(2), 129–176.
2. Jegadeesh, N., & Titman, S. (1993). Returns to Buying Winners and Selling Losers. Journal
of Finance, 48(1), 65–91.