.Regression analysis of weekly returns between NIFTY50 and
Polycab India Limited.
Author: Priya Thakre MBA (Finance)

Introduction:
Polycab is engaged in the business of manufacturing and selling wires and cables and fast moving electrical goods ‘FMEG’ under the ‘POLYCAB’ brand. Apart from wires and cables, they manufacture and sell FMEG products such as electric fans, LED lighting and luminaires, switches and switchgear, solar products and conduits & accessories. Their promoters collectively have more than four decades of experience among them. Company was incorporated as ‘Polycab Wires Private Limited’ on January 10, 1996 at Mumbai as a private limited company under the Companies Act, 1956.

Objective:
To understand the regression relationship between averages weekly returns of NIFTY50 and Polycab India Limited.

Data Collection:
The closing price data of Nifty50 and Polycab India Limited was taken from www.nseindia.com (National stock exchange) for the time period from 1st April 2021 to 31st March 2022.
From the available data, the closing rates of all the Fridays in the year was sorted to find out the weekly returns for both Nifty as well as Polycab India Limited. Then weekly return for both was calculated using Formula:
Weekly Return = ((C3-C2)/C2) *100
Where, C2 is Present week closing price and C1 is previous weeks closing price.
Once the data is calculated, weekly return column for NIFTY50 is considered as X variable and the weekly returns column for Polycab India Limited 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/∑x^2)
T stat for 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 =0.267024
F= 15.30068
P value= 0.000329
Below expression shows the relationship model between Polycab and NIFTY50 weekly returns.
Polycab Weekly Return = 0.909182-1.332442*(NIFTY50 Weekly Return)
Y=B+AX
A=0.909182
B=1.332442
Y=1.332442+0.909182X
t Stat=3.911

Conclusion:
The above equation tells us the relationship between x and y. If x rises by 1 unit, y will fall by 0.90 units and vise-versa. Figure in bracket that is 3.911 is the t stat for b. The p value for which 0.000329 is less than 0.05. Which means b is statistically significant at 5% level. R² is 0.267 which means 26% of y is explained by x. F is 15.300 and the p value 0.000329 is less than 0.05. It means the over all model is statistically significant at 5% level.