Title : Relationship of Nifty with SBIN
Author: Shubham Parmar
Introduction: State Bank of India (SBIN) is India’s largest public sector bank and a systemically important financial institution. Established in 1955, it offers a wide range of banking and financial services including retail banking, corporate lending, investment banking, and digital payments. SBI has an extensive domestic and international network, serving millions of customers across urban and rural India. The bank plays a crucial role in India’s economic development by supporting infrastructure, MSMEs, and financial inclusion initiatives.
Objective: Calculation of beta of SBIN and observe its significance
Literature Review:
View 1: Strong Historical Financial Performance but Some Weaknesses
A research paper analyzing SBI’s performance over an 11-year period (2002–2012) using financial ratios found that SBI ranked top among public sector banks in India, demonstrating sound financial strength and operational performance. The study attributes this strong performance to the bank’s adoption of modern technology, implementation of banking reforms, and effective recovery mechanisms. However, the authors also note that SBI needs improvement in areas such as debt-equity ratios and non-interest income generation, indicating some areas of financial weakness despite overall strong performance. (Sources: Indian Journal of Finance)
📌 View 2: Recent Share Price Trends Reflect Broader Economic Impacts
A more recent analytical study on SBI’s share price performance over the last five years (2019–2024) highlights that trends in the bank’s stock price are influenced by macroeconomic events, policy changes, and investor sentiment. The research suggests that SBI’s share price serves as a bellwether for the broader Indian banking sector, meaning that the performance of SBI stock often reflects larger economic and regulatory conditions affecting the industry as a whole. (Sources: IRR Journal)
Data Collection: The data of Nifty 50 and the data for SBIN was downloaded from 01-12-2024 to 30-01-2025 form NSE India.com. This data is used for finding out the Friday closing prices for Nifty 50 and Vodafone idea. Weekly return was calculated by the formula (Yt+1-Yt)/Yt*100 and then weekly returns of the Nifty 50 was taken as X and the equity of Vodafone Idea was taken as Y. Y was regressed on X.
Data Collection:
The data of Nifty 50 and the data for SBIN was downloaded from 01-12-2024 to 30-01-2025 form NSE India.com. This data is used for finding out the Friday closing prices for Nifty 50 and Vodafone idea. Weekly return was calculated by the formula (Yt+1-Yt)/Yt*100 and then weekly returns of the Nifty 50 was taken as X and the equity of SBIN was taken as Y. Y was regressed on X.
Data Analysis:
SBIN Returns = −693.61+0.0615(NIFTY 50)
- The above regression equation explains the relationship between the dependent variable (stock returns) and the independent variable (NIFTY 50 index values) using 49 weekly observations. The estimated regression equation is:
Returns = −693.61 + 0.0615 (NIFTY 50)
- The coefficient of the NIFTY 50 is positive (0.0615), indicating a strong positive relationship between market movements and the stock’s returns. This implies that a one-unit increase in the NIFTY 50 leads to an average increase of approximately 0.061 units in the stock’s returns, suggesting that the stock moves closely in line with the overall market.
- The t-statistic for the beta coefficient is 12.50 with a p-value of 1.47 × 10⁻¹⁶, which is far below the 1% and 5% levels of significance. This confirms that the market coefficient is highly statistically significant, indicating that NIFTY 50 movements have a meaningful and strong influence on the stock’s returns.
- The R-square value of 0.7689 shows that approximately 76.89% of the variation in the stock’s returns is explained by changes in the NIFTY 50, reflecting a strong explanatory power of the regression model. The F-statistic of 156.35 with a significance value close to zero indicates that the overall regression model is statistically significant, confirming a strong linear relationship between the stock and market index.
Conclusion:
The regression analysis indicates a strong and positive relationship between the stock and the NIFTY 50 index. The estimated beta coefficient (β = 0.0615) is positive and statistically significant, suggesting that the stock’s returns move in the same direction as the overall market. Although the beta value is less than 1, it reflects moderate market sensitivity, implying lower volatility compared to the market while still being influenced by systematic risk factors.
With an R² value of 0.7689, a substantial proportion of the variation in the stock’s returns is explained by movements in the NIFTY 50, indicating strong market dependence and limited influence of firm-specific factors. The highly significant F-statistic further confirms the robustness of the regression model. Overall, the stock behaves as a market-aligned security, making it suitable for investors seeking stable returns linked to market performance rather than speculative or firm-specific trading opportunities.
References:
Sharma, R., & Gupta, P. (2014). A Study of Financial Performance of State Bank of India.
Indian Journal of Finance, 8(7), 32–41.
Patel, M., & Shah, N. (2024). An Analysis of Share Price Movement of State Bank of India.
International Journal of Recent Research and Review (IJRR), 11(6), 85–92.