Relationship Of Apollo Hospitals Enterprise LTD With Nifty 50

Relationship Of Apollo Hospitals Enterprise LTD With Nifty 50

 

Introduction : 

Apollo Hospitals Enterprise Limited is an Indian multinational healthcare group headquartered in Chennai. It is the largest for-profit private hospital network in India, with a network of 71 owned and managed hospitals. Along with the eponymous hospital chain, the company also operates pharmacies, primary care and diagnostic centres, telehealth clinics, and digital healthcare services among others through its subsidiaries.  The company was founded by Prathap C. Reddy in 1983 as the first corporate healthcare provider in India. Several of Apollo’s hospitals have been among the first in India to receive international healthcare accreditation by the America-based Joint Commission International (JCI) as well as NABH accreditation.

Objective of the Study:

The primary objectives of this research paper are as follows:

  1. To analyze the financial and stock return performance of Apollo Hospitals Enterprise Limited in relation to overall market movements.
  2. To examine the relationship between Apollo Hospitals’ stock returns and market returns (NIFTY) using econometric techniques such as regression analysis.
  3. To evaluate the systematic risk (Beta) of Apollo Hospitals Enterprise Limited and understand its sensitivity to market fluctuations.
  4. To assess the stability and resilience of the healthcare sector, with Apollo Hospitals as a representative firm, especially during periods of economic uncertainty.
  5. To provide insights for investors regarding the risk–return characteristics of Apollo Hospitals Enterprise Limited.

Data Collection:

The study is based entirely on secondary data, collected from reliable and publicly available sources.

Nature of Data

  • Weekly closing prices of Apollo Hospitals Enterprise Limited
  • Weekly closing values of NIFTY Index

Sources of Data

  • National Stock Exchange (NSE) of India

Literature Review:

Several studies have examined the relationship between stock returns and market indices, as well as the performance of healthcare sector stocks.

Sharpe (1964) introduced the Capital Asset Pricing Model (CAPM), which explains the relationship between expected return and systematic risk, measured by beta. This model forms the theoretical foundation for regressing individual stock returns against market returns.

Fama and French (1992) expanded the understanding of asset pricing by highlighting that firm size and book-to-market ratios also influence stock returns, suggesting that market returns alone may not fully explain stock performance.

Brooks (2019) emphasized the application of ordinary least squares (OLS) regression in financial econometrics to evaluate stock–market relationships, interpreting beta, R², and statistical significance.

Studies focusing on the Indian healthcare sector indicate that healthcare stocks tend to show defensive characteristics, often being less volatile during economic downturns due to stable demand for medical services (Gupta & Modise, 2013). Apollo Hospitals, as a leading healthcare provider in India, is frequently cited as a benchmark firm in sectoral studies.

 

Recent empirical research suggests that large healthcare firms in India exhibit moderate to high market sensitivity, reflecting both market-wide effects and firm-specific growth factors.

DATA ANALYSIS:

• Regression Equation:

y=0.1292+1.0219x


• Where:

  • y = Weekly Return of the stock
  • x = Weekly Return of NIFTY

• Interpretation of Regression Coefficient (β):

 

The slope coefficient (β = 1.0219) indicates a strong positive relationship between NIFTY weekly returns and the stock’s weekly returns.
This means that for every 1% increase in NIFTY returns, the stock’s weekly return increases by approximately 1.02%, on average.

• Number of Observations:

 

48

• t-statistic for β:

t = 5.2599

This high t-value indicates that the coefficient is far from zero relative to its standard error

• p-value:

p = 3.66 × 10⁻⁶

Since p-value < 0.05 (and even < 0.01), the beta coefficient is statistically significant.
There is strong statistical evidence that NIFTY’s weekly returns significantly explain the stock’s weekly returns

• R² (Coefficient of Determination):

R² = 0.3756

This indicates that approximately 37.56% of the variation in the stock’s weekly returns is explained by movements in NIFTY weekly returns.
The remaining 62.44% is due to other factors not included in the model.

• F-statistic:

F = 27.6661

• Significance F:

3.66 × 10⁻⁶

Since Significance F < 0.05, the overall regression model is statistically significant, meaning the model provides a better fit than one with no independent variables.

• Intercept Analysis:

  • Intercept = 0.1292
  • p-value = 0.7227

The intercept is not statistically significant, implying that when NIFTY returns are zero, the stock return is not meaningfully different from zero.

Overall Conclusion:

  • There is a statistically significant and economically meaningful positive relationship between NIFTY weekly returns and the stock’s weekly returns.
  • The stock appears to be highly sensitive to market movements, with a beta slightly above 1.

The model explains a moderate proportion (≈38%) of return variation, suggesting that market movements are important, but firm-specific factors also play a significant role.

  • Reference:

    Gupta, R., & Modise, M. P. (2013). Does the Indian healthcare sector provide defensive returns? Economic Modelling

    Sharpe, W. F. (1964).
    Capital Asset Prices: A Theory of Market Equilibrium under Conditions of Risk.
    Journal of Finance, 19(3), 425–442.

    Brooks, C. (2019).
    Introductory Econometrics for Finance (4th Edition).
    Cambridge University Press.

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