Relationship between Nifty 50 and PNB
Author: Pratham Tambe
Introduction
Punjab National Bank (PNB) is one of India’s leading public sector banks, playing a significant role in the country’s financial system. The Nifty 50 index represents the performance of the top 50 companies listed on the National Stock Exchange (NSE) and serves as a benchmark for the Indian equity market. Understanding the relationship between PNB’s stock returns and Nifty 50 is crucial for investors seeking to evaluate systematic risk and portfolio decisions.
Objective
The objective of this study is to calculate the Beta of PNB with respect to Nifty 50 and to observe its significance in determining investment strategies.
Literature Review
Beta is a widely used measure of systematic risk in finance. According to Sharpe (1964), the Capital Asset Pricing Model (CAPM) establishes that the expected return of a security is linearly related to its beta, which reflects sensitivity to market movements.
Data Collection
Data for Nifty 50 and PNB was downloaded from NSE India for the period 1 January 2025 to 31 December 2025. Weekly closing prices (Friday) were extracted, and weekly returns were calculated.
- Weekly returns of Nifty 50 are denoted as X.
- Weekly returns of PNB are denoted as Y.
- Regression analysis was conducted with Y regressed on X.
Data Analysis
The regression output shows:
- Beta : 1.331
- R²: 0.363, indicating that ~36% of variation in PNB’s returns is explained by Nifty 50.
- Significance F: 5.89E-06, confirming statistical significance.
- The intercept (0.085) is not statistically significant (p = 0.85).
Equation:
[ Y = 0.085 + 1.331X ]
Interpretation:
- The beta value (>1) indicates that PNB is more volatile than the market.
- When Nifty rises, PNB tends to rise by a greater proportion, making it attractive for short-term investors seeking higher returns.
- However, higher beta also implies greater downside risk when the market falls.
Conclusion
Since Beta > 1, investors may consider PNB for short-term investment opportunities when Nifty is rising.
References
- Sharpe, W. F. (1964). Capital Asset Prices: A Theory of Market Equilibrium under Conditions of Risk. The Journal of Finance, 19(3), 425-442.
- NSE India. Historical data for Nifty 50 and Punjab National Bank. Retrieved from the National Stock Exchange website.
- TopStockResearch. Beta/Volatility of Punjab National Bank on Daily/ Weekly/ Monthly Period. Retrieved from https://topstockresearch.com
- Trendlyne. Punjab National Bank Share Price History, Seasonality, Performance Analysis, and Returns Pattern. Retrieved from https://trendlyne.com