Title:-calculation of beta of Sundaram Financelimited and significance relationship of sundaram finance limited with nifty<\/p>\n
Author :- Shivani rajesh yerunkar<\/p>\n
Introduction:-Sundaram Finance is a financial services company founded in 1954 that started with hire-purchase finance and is now diversified into Mutual Funds, Housing Finance, General Insurance, IT, Business Process Outsourcing and Retail Distribution. The company’s shares were listed on Madras Stock Exchange in 1972 and National Stock Exchange in 1998. The company has a market capitalization of Rs.18,634 cr. The company’s fixed deposits and long-term borrowings are rated “AAA” (Highest Credit Quality) with a “Stable outlook” by ICRA and CRISIL, while its short-term borrowings are rated “A1+”\/P1+ (very strong degree\u00a0of\u00a0safety).
\nObjective:- To understand the regression relationship between average weekly returns of Nifty 50 and Sundaram Finance Limited<\/p>\n
Literature Review:-<\/p>\n
1)Monetary Policy\u2002Effect\u2002on\u2002Nifty 50\u2002and Sectoral\u2002Indices-A Study from Indian Stock Markets
\n The monetary policy of RBI, which includes instruments such as CRR, SLR, Repo Rate, Reverse Repo Rate, and Bank Rate, can have a direct impact on the stock market returns and the overall economy of the country. This study aims to understand the relationship between selected monetary instruments and Nifty 50 & sectoral indices.we found that there is a strong linear relationship between variations in monetary tools and Nifty 50 & sectoral indices. However, changes in monetary tools had a more significant effect on Nifty 50 movement in the long term than in the short term. The study also revealed that there is a moderate linear relationship between changes in monetary policy tools and Nifty Energy movement, and the majority of the variations in Nifty Energy are unexplained jointly by variations in\u00a0monetary\u00a0tools.
\n (Chavannavar, et al\u00a0 December 2016 )<\/p>\n
2)\u00a0Price Reactions to\u2002Index\u2002Reorganization Announcements:\u2002Indian\u2002
\nEvidence
\nThe study analyzes the impact of inclusion and exclusion of stocks in the S&P CNX Nifty Index on stock prices from 2004 to 2006. The study finds that there are minor price changes before and after the announcement and execution dates, but these are insignificant. These results support the semi-strong form hypothesis, which suggests that stock prices reflect all publicly available information quickly, and it is not possible for an investor to beat the market using such information. In other words, the study implies that investors cannot gain an advantage by trading on the news of stock inclusion or exclusion\u00a0from\u00a0the\u00a0index.
\n (George, 2009.)<\/p>\n
Data Collection :-<\/p>\n
The closing price data of Nifty50 and Sundaram Finance Limited was taken from Yahoo Finance (https:\/\/finance.yahoo.com\/)for the time period 1ST APRIL 2022 to 31ST MARCH 2023.
\nFrom the available data, the closing rates of all the Fridays in the year was sorted to find out weekly returns for both Nifty as well as Sundaram Finance Limited then the weekly returns were calculated for both by using formula \u2013
\nWeekly return = (C3-C2)\/C2 *(100)
\nWhere C3 represent week closing price and C2 is previous week closing price.
\nOnce the data is calculated, weekly return column for NIFTY50 is considered as \u201cX\u201d variable and the weekly returns column for Sundaram Finance Limited is considered as \u201cY\u201d variable.<\/p>\n
Data Analysis:-<\/p>\n
We can write the equation in the form of Y = a + b(X)
\nWhere, Y = Sundaram Finance Returns
\n X = Nifty-50 Returns
\n a = intercept and b = slope
\nHence, the equation becomes,
\nY = O.4674+ 1.1199*X
\nSundaram finanace Returns = O.4674 +1.1199 *(Nifty-50 Returns)
\n \t\t\t (4.3480)
\nn = 51 R2 = 0.2784 and F = 18.9055
\nThe above equation shows the relationship between X and Y (As b is positive) means there is a direct relationship which implies that is X rises, Y also rises and vice versa. In this equation b = 1.11, that is if X rises by 1 unit, Y will rise by 1.11 unit, t-stat for b is greater than critical value, so b is statistically significant at 5% significance level.
\nR^2 = 0.2784 which means only27.84% of Y i.e., sundaram finance weekly returns is explained by X i.e., Nifty returns.
\nSimilarly, F = 18.90 , which is also greater than table value.
\nAnd p-value is greater than 0.05, so the model is statistically significant at 5% level of significance.<\/p>\n
Conclusion :- <\/p>\n
As,beta(b) is more than 1,which implies sundaram finance is good for short term investment.<\/p>\n
Reference:-<\/p>\n
1.Chavannavar, et al\u00a0,International Journal of Latest Technology in Engineering, Management & Applied Science (IJLTEMAS) Volume V, Issue XII, December 2016 academia.edu<\/p>\n
2.Roji George, 2009. “Price Reactions to Index Reorganization Announcements: Indian Evidence,”\u00a0Paradigm, , vol. 13(2), pages 88-97, July.<\/p>\n","protected":false},"excerpt":{"rendered":"
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