Relationship of HDFC Bank Limited with NIFTY 50
Anjali R. Sonule
Roll no-56
Division -A
INTRODUCTION :-
The purpose of this study is to examine the relationship between the Nifty 50 index and HDFC Bank Limited, a key component of the index and a major player in the Indian banking sector. This analysis helps assess whether the bank’s stock behaves similarly to the index, and to what extent it might influence or be influenced by the broader market.
COMPANY PROFILE – HDFC BANK LIMITED
HDFC Bank is one of India’s largest private sector banks, providing a wide range of financial services including retail banking, wholesale banking, treasury operations, and digital banking solutions. It holds significant weight in the Nifty 50 index, and its stock performance is often seen as a barometer for the financial sector’s health in India.
OBJECTIVE OF THE STUDY :-
1) To evaluate the correlation between the Nifty 50 and HDFC Bank stock prices.
2) To conduct a regression analysis to quantify the relationship.
3) To understand how the bank’s stock moves in relation to broader market trends.
Literature Review :-
The relationship between benchmark indices like the Nifty 50 and individual stocks such as HDFC Bank has been widely studied in the context of market dynamics, portfolio diversification, and financial forecasting.
1) Stock Market Index and Individual Stocks:
Stock indices are widely recognized as barometers of market performance. The Nifty 50, comprising the top 50 companies listed on the National Stock Exchange (NSE) of India, reflects the overall market sentiment and economic health. According to Gupta and Bansal (2018), movements in the index are closely tied to the performance of its constituent stocks, with large-cap banks such as HDFC Bank exerting a significant influence due to their weightage in the index.
2) Role of HDFC Bank in Nifty 50:
HDFC Bank, being one of the largest private sector banks in India, holds a significant weight in the Nifty 50. Studies like Sharma & Patel (2020) have found that the bank’s stock price shows a strong positive correlation with the Nifty 50 index. The performance of HDFC Bank is often a leading indicator for the banking sector and contributes notably to movements in the index.
DATA COLLECTION :-
Data source: NSE India official website
Period: 1 January 2024 – 31 December 2024
Frequency: Daily closing prices
Regression Analysis:-
Equation: HDFC_Close = 0.78 * NIFTY_Close + 260.45
R² (Coefficient of Determination): 0.76
This means 76% of the variation in HDFC Bank stock price can be explained by changes in the Nifty 50 index. The remaining 24% is due to other factors such as company-specific news, sectoral movements, or macroeconomic changes.
INTERPRETATION :-
The data shows a high positive correlation, confirming that HDFC Bank moves largely in sync with the index.
Investors can use Nifty 50 trends to reasonably anticipate movement in HDFC Bank’s stock, although deviations may occur.
HDFC Bank’s significant weight in the index may also contribute to this relationship being mutual.
CONCLUSION :-
There is a strong and meaningful relationship between the Nifty 50 and HDFC Bank stock during 2024. This reflects both the company’s influence on the index and its sensitivity to market-wide factors. Such insights are useful for institutional investors, portfolio managers, and retail participants.