TITLE: Relationship between weekly returns of NIFTY50 Index and Sun Pharmaceuticals Industries Ltd.
AUTHOR: Simran Kaur Renu
INTRODUCTION: Sun Pharma is an Indian multinational pharmaceutical company with headquarter in Mumbai that manufactures and sells pharmaceutical formulations and active pharmaceutical ingredients primarily in India and the United States of America. The company offers formulations in various therapeutic areas, such as cardiology, psychiatry, neurology, gastroenterology and diabetology. It also provides APIs such as warfarin, carbamazepine, etodolac, and clorazepate, as well as anti-cancers, steroids, peptides, sex deciding hormones, and controlled substances.
Sun Pharma was listed on the stock exchange in 1994 in an issue oversubscribed 55 times. The founding family continues to hold a majority stake in the company. Today Sun Pharma is the second largest and the most profitable pharmaceutical company in India, as well as the largest pharmaceutical company by market capitalization on the Indian exchanges.
The Indian pharmaceutical industry has become the third-largest producer in the world in terms of volumes and is poised to grow into an industry of $36.7 billion from $20 billion in 2015. In terms of value India still stands at number 14 in the world.
Sun Pharma stood second in the India’s Most Reputed Brands (Pharmaceutical) list in a study conducted by Blue Bytes, a leading Media Analytics firm in association with TRA Research, a brand insights organization (both a part of the Comniscient Group).
MY OBJECTIVE: To calculate β of Sun Pharma and observe its significance using regression analysis with NIFTY50.
DATA COLLECTION: The data of both NIFTY50 index and Sun Pharma weekly closing price of shares has been collected from NSE portal (https://www1.nseindia.com/) . The data has been analyzed for the period 1st January 2019 to 31st December 2019.
From the data drawn, the closing share price of all Fridays in the year 2019 was sorted to find out weekly returns for both NIFTY50 and Sun Pharma.
Weekly return column for NIFTY50 is considered as “X” variable and the weekly returns column for Sun Pharma is considered as “Y” variable.
DATA ANALYSIS: Based on the weekly closing price format, weekly returns were calculated using degree of freedom formula (Week2 – Week1/Week1*100). The weekly returns of NIFTY50 were considered “Y” and that of Sun Pharma as “X”.
Using the regression option under data analysis in MS Excel, following details were obtained.
Number of observations (N): 50
R square: 0.000107612418238764
F: 0.00516595199604749
T stat: 13.6664375461321
The above values tell us the relationship between NIFTY50 and Sun Pharma week closing price of shares.
The T stat value 13.66644 for “b” and p value (0.3664) is less than 0.05 which means “b” is statistically significant at 5% level.
R square is 0.000108 which means 1% of Y (Sun Pharma) is explained by X (NIFTY50). In other words, 99% of other factors are not present in the model.
F is 0.00516 and p value is less than 0.05 which means overall the model is statistically significant.
CONCLUSION: The model is good but we can depend only 1% on it.