Regression Analysis of  Weekly Returns between NIFTY50 and Syngene International Ltd


Submitted By:

Swaraj Bhattacharya
Roll No. 57
ITM Executive MBA Batch 1 (2015-2017)

Introduction:

Syngene is a leading custom research and manufacturing organization, which supports R&D programs from lead generation to clinical supplies. This company was incorporated in 1993 as a subsidiary of Biocon Limited.

Syngene has a strong corporate governance framework with a focus on client satisfaction, quality, safety, ethics and integrity. Syngene has state-of-the-art research facilities certified with ISO 9001:2008, ISO 14001:2004, and OHSAS 18001:2007.

Over the last 20 years, they have successfully offered there services to more than 250 clients including start-up companies, large pharma/ biotech, agrochemical, chemical, nutrition and animal health companies in the USA, Europe and Asia Pacific including Japan.

 

Objective:

To understand the regression relationship between average weekly returns of Nifty 50 and Syngene International Ltd.

 

Views and Reviews:

Syngene Q4 Profit rose to Rs.66 crore in the fiscal fourth quarter, from Rs.56 crore in the year-ago period. The profit was notched up on a 28% increase in revenue to Rs.334 crore from Rs.254 crore.

Syngene has set a sales target of $250 million by end of this financial year and its client base increased to 256 from 221 a year ago.Syngene has also cleared three US Food and Drug Administration (FDA) inspections of its facility in Benguluru during the fourth quarter.

“This momentum, combined with our extensive capital investment plans, puts us on-track to achieve our mid-term revenue target for FY18 and deliver excellent returns for our investors,” said Jonathan Hunt, chief executive of Syngene.

 

Research Methodology:

The closing price data of Nifty50 and Syngene International Ltd was taken from www.nseindia.com (National Stock Exchange) for the time period 2nd May 2015 to 30th April 2016.

From 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 Syngene. Then the weekly returns was calculated for both by using formula –

Weekly Return =(W2-W1)/(W1*100)
where, W2 is present week closing price and W1 is the previous week closing price.

Once the data is calculated, weekly return column for NIFTY50 is considered as “X” variable and the weekly returns column for Syngene Science is considered as “Y” variable.

The Model and formulas used are :-
Y = a +bX
X ̅ =∑X/N
Y ̅=∑Y/N
x = X – X ̅
y = Y – Y ̅
b=∑xy/∑(x)^2
a= Y ̅- bX ̅
e = Y – Y ̅
Variance of error=(σe)^2 =∑e^2/N-K
S.E of b = √ ((σe)^2 /∑x^2)
t stat of b =   b/ S.E of b
TSS=ESS+RSS
ESS = (b^2)*(∑x^2)
RSS = ∑e^2
R^2 = ESS/TSS
F = Mean ESS/Mean RSS

 

Data Analysis:

Utilizing the Regression Add-on in Microsoft Excel Data Analytics tool below values were acquired

R Square = R^2 = 0.06317243
a =  0.503725355
b =  0.33735036
F =  2.967020841
P value =  0.092001314

Below expression shows the relationship model between Syngene and NIFTY50 weekly returns :

Syngene Weekly Return = 0.503725355  + 0.33735036 *(NIFTY50 Weekly Return)

 

Conclusion:

Based on the research methodology and data analysis performed we can conclude that only 6% of Syngene weekly returns can be explained by NIFTY50 weekly returns, remaining 94% is dependent upon Syngene’s fundamentals and policies. Also its evident that 1% increase in NIFTY50 returns will result in 0.33% increase in Syngene returns.

Since F value is greater than the P value this model is not statistically good and significant.Risk factor of using this model for forecasting Syngene’s weekly returns are very high.