Topic: Relationship of Nifty 50 with Aadhar Housing Finance Limited
Author: Arnav Garg
Introduction:
Aadhar Housing Finance Limited is a leading Indian housing finance company focused on the low-income housing segment, primarily serving Tier 2 to Tier 4 cities. Backed by Blackstone, it provides mortgage loans to salaried and self-employed individuals who often lack formal credit documentation. With over ₹27,000 crore in AUM and a network of 600+ branches, it plays a vital role in financial inclusion. The company achieved a significant milestone in May 2024 with its listing on the BSE and NSE.
Objective:
The primary objective of this study is to analyse the systematic risk of Aadhar Housing Finance Ltd. relative to the broader market (Nifty 50 Index). Specifically, the study aims to:
- Calculate the Beta (β) coefficient of Aadhar Housing Finance.
- Determine the stock’s volatility compared to the market benchmark.
- Assess whether the stock acts as an aggressive or defensive investment during the analysed period.
Literature Review:
· Modern Portfolio Theory (MPT): Discusses how adding low-beta (defensive) stocks like Aadhar Housing can reduce overall portfolio variance.
· Systematic vs. Unsystematic Risk: Systematic risk (Market risk) cannot be diversified away, while unsystematic risk (Company-specific risk) can be mitigated through a diversified portfolio.
Data Collection:
The data for this analysis was sourced from the provided financial dataset covering the period from December 1, 2024, to November 30, 2025.
- Stock: Aadhar Housing Finance Ltd. (Closing Prices).
- Market Index: Nifty 50 (Closing Prices).
- Frequency: Weekly closing prices were used to calculate weekly returns.
- Observation Count: 48 weekly data points.
- Variables:
- Independent Variable (X): Weekly Returns of NIFTY 50 Index.
- Dependent Variable (Y): Weekly Returns of AADHARFC.
Data Analysis:
· Regression Equation:
Aadhar Cement Limited (Y) = -0.1013 + 0.6094 * Nifty 50 (X)
· Other Variables:
o T-Stat: 2.2498
o No. of Observations (n): 48
o R^2: 0.0991 (91%)
o F- Stat: 5.0615
o P- Value: 0.0293
· Interpretation:
o The regression equation above describes the relationship between the Weekly Return of Nifty 50 (X) and the share price of Aadhar Housing Finance Limited (Y). A positive coefficient of X indicates a direct relationship.
o If the weekly price of Nifty 50 rises by 1%, the weekly price of Aadhar Housing Finance Limited will rise by 0.61% and vice versa.
o The t-stat for Beta (coefficient of Weekly Return of Nifty (X)) is 2.2498, and the p-value is 0.0293, which is less than 0.05, indicating that Beta (β) is statistically significant at the 5% level.
o The number of observations is 48, and R^2 is 0.0991, meaning that 91% of the variation in the Weekly Return of Aadhar Housing Finance Limited (Y) is explained by the Weekly Return of Nifty (X), while the remaining 9% is attributed to other factors not included in the model, such as equity fundamentals.
o This is not a good sign, as the Nifty index influence is more, and the company fundamentals are not strong. The F-stat is 5.0615, and the p-value is 0.0293, indicating that the overall model is statistically significant at the 5% level.
Conclusion:
Since Beta (β) = 0.6094, which is less than 1, the stock is a defensive one, and one must invest in this company for the long term if Nifty is expected to rise.
References:
- Sharpe (1964): Foundational CAPM theory explaining Beta and market risk.
- Bodie, Kane & Marcus (2021): Discuss aggressive vs. defensive stocks based on Beta values.
- Ross, Westerfield & Jaffe (2019): Provides insights into Beta interpretation for investment strategy