Title: Relationship between Nifty 50 and Sundaram Finance Ltd.
Author: Shruti Rajendra Patil.
Introduction:
Sundaram Finance Limited is a trusted Indian financial services company founded in 1954. It started by helping transport operators buy vehicles and has now grown into a diversified company offering loans, insurance, and investment services. Known for its strong values and customer-first approach, it has built long-term trust with millions of customers across India.
Objective:
To calculate Beta and observe its significance.
Literature Review:
According to William F. Sharpe (1964), Beta measures the systematic risk of a stock in relation to the overall market. A Beta value greater than 1 indicates higher volatility than the market, while a value less than 1 indicates lower risk. (Sharpe, 1964)
According Rakesh Gupta (2018), financial service companies, especially NBFCs, tend to show a strong positive relationship with benchmark indices like the Nifty 50 due to their sensitivity to economic cycles and interest rate changes. This imply that Sundaram Finance Ltd. may exhibit significant co-movement with market returns, making Beta an important measure for investors. (Gupta, 2018)
Data Collection:
Data for Nifty 50 and Sundaram Finance Ltd. was downloaded from nseindia.com for the period 1-1-25 to 31-12-25. The data was manipulated to get Friday Closing Prices of Nifty 50 and Sundaram Finance Ltd . Weekly Returns were calculated. Weekly Returns of Nifty 50 were named as X and Weekly Returns of Sundaram Finance Ltd were named as Y. Then Y was regressed on X.
Data Analysis:
Equation:
Y = a + bx
a = Intercept
b = Beta
a = 0.139258031
b = 1.392295116
The Regression Equation:
Y = 0.139258031 + 1.392295116x
Description:
The regression equation obtained from the analysis shows the relationship between NIFTY returns (X) and the company returns (Y) of Sundaram Finance Limited. The coefficient of X (Beta) is 1.3923, which is positive. This indicates that there is a direct relationship between the NIFTY returns and the company returns. This means that when the market return increases, the company return also tends to increase, and vice versa.
The value of beta (1.3923) indicates that for every 1 unit increase in NIFTY return, the company return increases by approximately 1.3923 units. Since the beta value is greater than 1, it shows that the company is more volatile and riskier than the market, and its movements are larger than overall market movements.
The intercept value is 0.1393, which represents the expected return of the company when the NIFTY return is zero.
The p-value for Beta is 0.000455, which is less than 0.05. This indicates that the model is statistically significant, and the relationship between NIFTY returns and company returns is meaningful.
Conclusion:
Beta is more than 1, Invest in this company for short term if Nifty rises.
Reference:
Sharpe, W. F. (1964). Capital Asset Prices: A Theory of Market Equilibrium under Conditions of Risk. Journal of Finance.
Gupta, R. (2018). Stock Market Volatility and Sectoral Analysis in India. International Journal of Finance.