Title: Relationship of Nifty with Kotak Mahindra Bank Limited
Author Name: Komal Gond
Introduction
Kotak Mahindra Bank Limited (KMBL) is a leading private-sector bank in India, founded in 1985 by Uday Kotak as Kotak Capital Management Finance Ltd., initially focusing on investment banking and financial services. It became a fully-fledged commercial bank in 2003 after receiving approval from the Reserve Bank of India. Today, the bank offers a wide range of services, including retail and corporate banking, loans, insurance, and wealth management. Known for its strong digital presence, Kotak Mahindra Bank introduced the Kotak 811 digital savings account, enabling customers to open accounts remotely. With a robust financial performance, strong asset quality, and a focus on customer-centric services, the bank has grown into a prominent player in the Indian banking industry. It operates over 1,600 branches in India and has a global presence, establishing itself as one of the safest and most trusted banking institutions in the country.
Objective
The primary objective of this study is to determine the beta value of Kotak Mahindra Bank limited in relation to the Nifty 50 index. The beta measures the volatility of Kotak Mahindra Bank Limited compared to the overall market. Additionally, the significance of this relationship is analyzed to understand how the stock reacts to market changes. This information will help investors assess the short term investment potential of Kotak Mahindra Bank Limited.
Literature Review
1.“Central Bank Digital Currencies and Banking: Literature Review and New Questions” by Davoodalhosseini, Janet Hua Jiang, Francisco Rivadeneyra, and Yu Zhu (2023) : This paper reviews the emerging literature on central bank digital currencies (CBDCs), focusing on their potential impacts on private banks. It evaluates these impacts in areas such as payments, lending, and liquidity, discussing lessons learned and identifying gaps in the research yet to be fully explored.
2. “A Survey of Literature Review On Bank Performance” by Nina Sinițin (2021) : This study analyzes existing literature on banking sector performance, aiming to identify topics of interest and development niches. The paper presents a content analysis of 14 literature reviews on banking sector performance, highlighting diverse themes such as banking efficiency, risk, competition, and profitability.
Data Collection
Data for Kotak Mahindra Bank 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 Kotak Mahindra Bank Limited as Y. A Linear regression analysis was performed where Y was regressed on X.
Data Analysis
The regression equation is Y= 0.2631+0.6351X.
This describes the relationship between the Nifty 50 (X) and the Kotak Mahindra Bank share price variable (Y), Indicating that Kotak Mahindra Bank share price is the dependent variable. The positive coefficient of 0.6351suggests that for every unit increase in Nifty 50, Kotak Mahindra Bank share price is expected to increase by 0.6351 units. With 47 observations (N =47), the model’s R-squared value is 0.1257, indicating that only 12.57% of the variation in Kotak Mahindra Bank share price can be explained by changes in Nifty50, while the remaining 87.43% is attributed due to other factors not included in the model. The p-value for the slope is 0.0145, which is less than 0.05, indicating the relationship between the Nifty 50 and Kotak Mahindra Bank limitedshare price is statistically significant at the 5% level. Consequently, this model has provide strong evidence of a significant linear relationship between Nifty50 and KotakMahindra Bank share price, suggesting that market movements have a meaningful impact on the company’s stock price.
Conclusion :
Since the beta (0.6351) is less than 1, it indicates that Kotak Mahindra Bank Limited is good for long term investment.
Reference
1.James Chapman & Jonathan Chiu & Mohammad Davoodalhosseini & Janet Hua Jiang & Francisco Rivadeneyra & Yu Zhu, 2023. “Central Bank Digital Currencies and Banking: Literature Review and New Questions,” Discussion Papers 2023-4, Bank of Canada.
2.Nina Siniţîn, 2021. “A Survey Of Literature Review On Bank Preformance,” Annals of Faculty of Economics, University of Oradea, Faculty of Economics, vol. 1(1), pages 235-241, July.