Title: Relationship of Nifty50 with RBL Bank Limited
Author: Riya Govekar
Introduction:
RBL Bank Limited, founded in 1943, is a fast-growing Indian private sector bank headquartered in Mumbai. It serves over 15 million customers nationwide through 580 branches and 1,300+ business correspondent branches. RBL provides comprehensive financial services across retail, corporate, and SME segments.
Objective:
Calculation of Beta & observe its Significance.
Literature Review:
William F. Sharpe (1964) developed the Capital Asset Pricing Model (CAPM), which explains the relationship between risk and return. The study introduced beta as a measure of a stock’s sensitivity to market movements, making it a key tool in analyzing the relationship between individual stocks and market indices like the Nifty 50.
Eugene F. Fama and Kenneth R. French (1992) expanded the understanding of stock returns by suggesting that factors beyond beta also influence returns. However, they confirmed that market risk remains a significant determinant in explaining stock performance.
Data Collection:
Data for Nifty50 & RBL Bank Limited was downloaded from NSEindia.com For the period 01-01-2025 to 31-12-2025, Friday closing prices for Nifty50 & RBL Bank Limited were segregated. Weekly returns of Nifty50 & RBL Bank Limited were calculated. Weekly return of Nifty50 were taken as X & weekly return of RBL Bank Limited were taken as Y.
Y was regressed on X.
Data Analysis:
Equation- Y= 1.1669+1.0507X
N= 48, R square =0.28, F=18.5987,
P value= 8.45E-05, B= 1.05, t stat= 4.3126,
The above equation shows the relationship between Nifty 50 and RBL Bank Limited, there is positive relationship which means if Nifty 50 rises RBL Bank Limited rises and vice-versa, if Nifty 50 rises by 1 unit the RBL Bank Limited will rise by 1.05 units number of observation are 48 Tstat for beta is 4.3126, the P-value for which is 8.45E-05, which is less than .05 meaning beta is statistically significant at 5% level means Nifty 50 impacts at 5% level. R square is 0.28, meaning 28% of RBL Bank Limited is explained by Nifty 50. 72% is the error due to the variables not included in the model. F is 18.5987, and the P-value is 8.45E-05 which is less than .05 it means overall the model is statistically significant at 5% level.
Conclusion:
B>1, Hence invest for short term if nifty 50 rise
Reference:
William F. Sharpe (1964). Capital Asset Prices: A Theory of Market Equilibrium under Conditions of Risk. Journal of Finance, 19(3), 425–442.
Eugene F. Fama & Kenneth R. French (2004). The Capital Asset Pricing Model: Theory and Evidence. Journal of Economic Perspectives, 18(3), 25–46.