A Study on Implementation of CAPM on Nifty 50 Stocks
Ms Tanushree Sampgaonkar , Prof. Shreyas Murdeshwar
ABSTRACT
The Capital Asset Pricing Model (CAPM) is a fundamental financial model that explains the relationship between expected return and systematic risk of securities. It provides a theoretical framework for pricing risky assets by linking their expected returns to market risk, measured through beta. The NIFTY 50 index, representing the performance of 50 large-cap companies listed on the National Stock Exchange (NSE) of India, serves as a key benchmark for the Indian equity market. This study examines the implementation and applicability of the CAPM on selected NIFTY 50 stocks to analyze their risk–return dynamics and market valuation.
The primary objectives of the study are to evaluate the effectiveness of CAPM in explaining the expected returns of NIFTY 50 stocks and to determine whether those stocks are undervalued or overvalued by comparing CAPM-based expected returns with actual market returns. The study also aims to assess the degree of systematic risk associated with the selected stocks.
The research methodology is based on secondary data collected from reliable sources such as the National Stock Exchange, published financial databases, and official market reports. Monthly returns of selected NIFTY 50 stocks, NIFTY 50 index returns, and risk-free rates are used to estimate beta coefficients and expected returns under the CAPM framework. Statistical and comparative analyses are employed to interpret the results.
The expected outcomes of the study suggest that CAPM provides meaningful insights into the risk–return relationship of NIFTY 50 stocks. The findings are anticipated to indicate whether the selected stocks are undervalued or overvalued, thereby offering practical implications for investors, portfolio managers, and academicians in portfolio selection and investment decision-making.
Keywords
Capital Asset Pricing Model (CAPM), NIFTY 50, Systematic Risk, Beta, Expected Return, Stock Valuation, Indian Stock Market
