Title: Relationship between NIFTY and Asian Paints
Author: Aisha Shaikh
Introduction
The stock market plays an important role in understanding the performance of companies and the overall economy. NIFTY 50 is a major index that represents the top companies listed on the National Stock Exchange of India. This study focuses on analyzing the relationship between NIFTY and Asian Paints. By comparing their returns, we can understand how the company moves with the market. This helps investors make better investment decisions.
Objective
To calculate the Beta and observe its significance.
Literature Review
(William F. Sharpe, 1964) introduced the Capital Asset Pricing Model (CAPM), which highlights the role of Beta in determining expected returns of a stock. The model shows that stocks like Asian Paints are affected by overall market movements. Beta helps investors decide whether a stock is risky or stable compared to the market.
According to (John Lintner, 1965) Beta plays a key role in explaining the relationship between individual stocks and the overall market. His research supports that a company’s returns are directly influenced by market movements such as NIFTY 50. This helps investors measure systematic risk and make informed investment decisions.
Data collection
Data for NIFTY 50 and Asian Paints was downloaded from NSE India’s website (https://www.nseindia.com/) for the period of 1/1/2025 to 31/12/2025. The data was manipulated to obtain Friday closing prices of NIFTY 50 and Asian Paints. Weekly returns were calculated. Weekly returns of NIFTY 50 are named as X, and weekly returns of Asian Paints are named as Y. Y was regressed on X.
Data Analysis
N=48
R square=0.179
F=10.042
P value=0.0027
B=0.744
T-stat=3.168
Equation- Y=0.1759+0.74455X
The above equation shows the relationship between NIFTY 50 and Asian Paints Ltd. Positive beta means there is a direct relationship between the two variables, which implies that if the NIFTY 50 index rises, Asian Paints stock also rises, and vice versa. If NIFTY 50 increases by 1 unit, the stock price of Asian Paints increases by 0.7446 units. The number of observations is 48. The T-statistic for beta is 3.1689. The P-value is 0.0027, which is less than 0.05, indicating that beta is statistically significant at the 5% level. The R-squared value is 0.179, which means 17.9% of the variation in stock returns is explained by the model, while the remaining 82.1% is due to other factors not included in the model. The F-statistic is 10.042 and the Significance F is 0.0027, which is less than 0.05, indicating that the overall model is statistically significant at the 5% level.
Conclusion
Beta is less than 1 (0.744), invest in this company for long term.
References
Sharpe, W. F. (1964). Capital asset prices: A theory of market equilibrium under conditions of risk. Journal of Finance, 19(3), 425–442.
Lintner, J. (1965). The valuation of risk assets and the selection of risky investments in stock portfolios. Review of Economics and Statistics, 47(1), 13–37.