Author: Sejal Jain
Introduction
Shriram Finance Limited is one of India’s leading non-banking financial companies (NBFCs), offering a wide range of financial services including commercial vehicle loans, personal loans, MSME finance, two-wheeler loans, and deposit products. The company has a strong presence across urban and rural India, catering largely to underserved and middle-income segments. With a robust branch network and diversified loan portfolio, Shriram Finance plays an important role in enhancing credit access and financial inclusion. As a listed entity on both the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE), the company attracts significant investor interest in the Indian financial market.
Objective of the Study
The primary objective of this study is to analyse the systematic risk of Shriram Finance Limited in comparison with the broader market represented by the Nifty 50 Index. The specific objectives are:
- To calculate the Beta (β) coefficient of Shriram Finance Limited
- To evaluate the volatility of the stock relative to the market benchmark
- To determine whether the stock behaves as an aggressive or defensive investment during the study period
Literature Review
- Modern Portfolio Theory (MPT) explains that the inclusion of low-beta or defensive stocks helps in reducing overall portfolio risk while maintaining stable returns.
- Systematic and Unsystematic Risk: Systematic risk refers to market-related risk that cannot be eliminated through diversification, whereas unsystematic risk is company-specific and can be reduced through a diversified portfolio.
- Capital Asset Pricing Model (CAPM) establishes Beta as a measure of systematic risk and explains the relationship between expected returns and market movements.
Data Collection
The data for this study has been collected from the provided spreadsheet covering the period from 1 December 2024 to 30 November 2025.
- Stock: Shriram Finance Limited (Weekly Closing Prices)
- Market Index: Nifty 50 Index (Weekly Closing Prices)
- Frequency: Weekly data
- Number of Observations: 48 weekly observations
Weekly returns were calculated using closing prices for both the stock and the market index.
Variables
- Independent Variable (X): Weekly Returns of Nifty 50 Index
- Dependent Variable (Y): Weekly Returns of Shriram Finance Limited
Data Analysis
Regression Equation
Shriram
Finance Limited (Y)=-0.6028+1.0436×Nifty 50
(X)
Other Variables
- Beta (β): 1.0436
- T-Statistic: 2.502
- Number of Observations (n): 48
- R²: 0.1200 (12%)
- F-Statistic: 6.261
- P-Value: 0.0160
Interpretation
- The regression equation above explains the relationship between the weekly returns of the Nifty 50 Index (X) and the weekly returns of Shriram Finance Limited (Y). The positive Beta coefficient indicates a direct relationship between market movements and the stock’s returns.
- If the weekly return of the Nifty 50 increases by 1%, the weekly return of Shriram Finance Limited increases by approximately 1.04%, indicating that the stock is more sensitive to market movements.
- The t-statistic value of 2.502 and p-value of 0.016, which is less than 0.05, indicate that the Beta coefficient is statistically significant at the 5% level.
· The R² value of 0.12 indicates that 12% of the variation in the weekly returns of Shriram Finance Limited is explained by movements in the Nifty 50 Index, while the remaining 88% of the variation is due to company-specific factors such as operational performance, credit quality, management efficiency, and industry conditions.
· The F-statistic value of 6.261 with a p-value of 0.016 confirms that the overall regression model is statistically significant at the 5% level.
Conclusion
· Since the Beta (β) value is 1.0436, which is greater than 1, Shriram Finance Limited is classified as an aggressive stock. This indicates that the stock is more volatile than the market and tends to amplify market movements. Therefore, Shriram Finance Limited may be suitable for investors with a higher risk appetite, particularly when positive market conditions are expected.