Relationship of ITC company with Nifty fifty and to calculate Beta.

Author: Miss. Isha Dhaktode.

Objective:
Relationship of ITC company with Nifty fifty.
To calculate Beta of ITC company and see its significance.

Literature Review:

Natarajan’s view on ITC

Karan Issar (Jul 12, 2011) Gopinath Natarajan, EVP, IIFL PReMIA feels that, overall with a non-cigarette income revenue growing, the delta from that portion also is kind of in favor of ITC.
Natarajan told CNBC-TV18,”The markets kind of surprised quite a few people with this kind of a big move. Overall, the markets have been possibly moving in about 7-8% kind of a range with a pivot being at about 5500. Especially if you see in with the kind of flavours the market has liked the kind of things markets have been liking ITC is clearly one among them”
He further added,”ITC has been a performer for almost a few months now. Possibly also because of the fact that it not only brings about a defensive flavor, but their cigarette business is doing well. The pricing power is there in the cigarette business and also the non-cigarette income like your Sunfeast, your Ashirwad, all these also achieving some kind of scale that’s also a key point, which is in favor of ITC. Overall with non-cigarette income revenue growing,the delta from that portion is also kind of in favor of ITC.

ITC FMCG Dis Strat

This case best research work was carried out to get an understanding of the distribution process of ITC and also that of its competitors. The distribution process, although being quite similar, differs in the schemes and offers provided to the retail outlets. The tough competition in the FMCG sector makes it important to constantly revise the schemes as per the market condition. Understanding the taste and the preference of the consumer provides useful insight into the market conditions and helps companies devise their schemes accordingly.
The taste of the consumers changes constantly and they need a change or newness in the products that they use. They also look for value for their money and want the companies to provide them with the best deals possible. Little differences in the products make the consumer choose one product over the other and so the companies need to provide their consumers with the best deals so that they increase their customer loyalty towards their product and get more and more consumers to choose their product.
In the biscuit segment major players are Britannia, parle, cadbury and ITC. Britannia and parle have the advantage of time as they have been in this sector for a very long time and people relate to their brand due to this. ITC is a fairly new company to enter this sector but their products have gained popularity and continue to do so.

Data collection:
Date and closing prices of ITC company and nifty fifty has been downloaded from nseindia.com .
Friday closing prices were calculated in week returns.
Nifty fifty is taken as (X) and ITC company is taken as (Y).
Calculating Beta by using a Regression tool in Data Analysis in excel.

Data Analysis:
Y = -0.40+0.82X
ITC shares = -0.40 + 0.82 Nifty fifty
N = 47
R square = 0.25
F= 14.97

The above equation tells us that the relationship between ITC company (Y-Demand) and Nifty fifty (X-Price) negative sign means it has a direct relationship.
If price rises, demand rises and if price rises, demand rises.
As b is 0.82, if X rises by 1 unit demand will rise by -0.40 units and vice versa.

t-stat for b is 3.87 and the p value is less than 0.05 rather it is less than 0.01 which means b is statistically significant at 1% level.

R square is 0.25 which means 25% of demand (variances in demand) is explained by X.

F is 14.97 and the p value for this is also less than 0.01 which means overall this model is statistically significant at 1% level.

Conclusion:
This is a good Beta and good model.

Reference:
Karan Issar (Jul 12, 2011) Natarajan’s view on ITC https://www.scribd.com/doc/59852000/Literature-Review

Vishnu S Kumar (Jul 08, 2015) ITC FMCG Dis Strat
https://www.scribd.com/document/270904809/Itc-Fmcg-Dis-Strat