Title:Relation of Shriram Finance Limited with Nifty50
Author: Sanskar Sankar
Introduction: Shriram Finance Limited, a leading non-banking financial company (NBFC) in India, was established in 1979 and is headquartered in Chennai, Tamil Nadu. The company specializes in providing a wide range of financial services, including commercial vehicle loans, personal loans, gold loans, and business financing. As one of India’s largest retail NBFCs, Shriram Finance plays a significant role in extending credit to diverse customer segments, supporting economic growth. The company is listed on the National Stock Exchange (NSE) and has demonstrated strong financial performance over the years.
Objective: To determine the Beta of Shriram Finance and its significance in relation to Nifty50.
Literature Review:
Financial Stability of NBFCs in India Gupta, R. (2022) highlights the role of NBFCs in the Indian financial system and their resilience amidst regulatory changes. The study emphasizes the importance of risk assessment metrics, such as beta values, to measure stock volatility in relation to market indices like Nifty50. It suggests that well-established NBFCs exhibit lower volatility and are crucial for financial inclusion.
Impact of Market Trends on Financial Stocks Patel, S. (2020) examines how macroeconomic factors influence the performance of financial stocks, including NBFCs. Using regression models, the study finds that interest rate fluctuations and economic policies significantly impact NBFC stock prices. The research underscores the importance of understanding beta values for investment decisions.
Data Collection: Historical data for Shriram Finance and Nifty50 was collected for the period 1-1-24 to 31-12-24. The closing prices on Fridays were extracted, where Nifty50 = X and Shriram Finance = Y. Regression analysis was conducted to determine the correlation between them.
Data Analysis: Equation: Shriram Finance = 2.134 + 1.752 Nifty50
Interpretation: The regression equation indicates that Shriram Finance’s stock price is dependent on Nifty50. The coefficient of 1.752 suggests that for every unit increase in Nifty50, Shriram Finance’s price is expected to increase by 1.752 units. With 46 observations (N = 46), the R^2 value is 0.1023, implying that approximately 10.23% of the variation in Shriram Finance’s price is explained by changes in Nifty50. The F-value for the model is 5.21, with a p-value of 0.0354, confirming statistical significance at the 5% level. This suggests a notable linear relationship between Nifty50 and Shriram Finance’s stock price.
Conclusion: Shriram Finance’s beta of 1.75 indicates higher volatility compared to the market, making it a suitable option for investors seeking higher returns in a dynamic market.
References:
Gupta, R. (2022). “Financial Stability of NBFCs in India,” Journal of Financial Studies, Vol. 34(2).
Patel, S. (2020). “Impact of Market Trends on Financial Stocks,” Indian Economic Review, Vol. 28(3).
