Calculation of Beta for Mahindra CIE Automotive and Its Significance
Author’s Name: Mitali Kankaria
Introduction
Mahindra CIE Automotive Limited is an India-based multi-technology automotive components supplier with a presence in many technologies, which include forgings, castings, stampings, magnetic products and composites. The Company is focused on the automotive market, including cars, utility vehicles, commercial vehicles and tractors. Its forging business includes business offers crankshafts, stub axles, forged and machined parts, front axle beams and steel pistons, flash less near Nett forgings and forged steel parts; Stampings business offers sheet metal stampings. components and assemblies; Castings business offers turbocharger housings, axle and transmission parts; Aluminium casting business includes High pressure or Gravity die casting specialized in Thin wall to thick wall parts, such as complex engine components, Brake system parts, Aesthetically sensitive parts. It has approximately 31 manufacturing facilities including eight manufacturing facilities in Europe and one in Mexico.
Objectives
To calculate beta of Mahindra CIE automotive and its significance.
Data Collection
Data collection for the period starting from 1st December 2021 to 30th November 2022 has been downloaded from nse.com. Then Friday weekly Closing Prices have been calculated.
And weekly data of equity share of the chosen company has been regressed on weekly report of NIFTY50.
Data Analysis
Regression Equation that was formed after the calculations is-
=0.825NiftyX-0.392+e
Where, N=49; R2= .104 F= 5.50
Interpretation
The equation mentioned above tells us about the relationship between Nifty50 value and Mahindra CIE Automotive stock prices.
Presence of Negative sign in the equation represents that there’s inverse relationship between the two i.e., if the value of NIFTY50 rises, stock price of Mahindra CIE Automotive will also decline. The Co-efficient of NIFTY is 0.5425 which means if NIFTY rises by 0.825 the stock price Mahindra CIE Automotive will decline by 1 unit and vice versa.
Total Number of Observations is 49.
Figure in the bracket is T-stat and the P-Value of which is 0.006 which is less than 0.05 which means p is statistically significant at 3% level. Also, it is less than 0.01 so we can say that p is statistically significant at 1% level.
R2 is 0.104 which means 14% of Mahindra CIE Automotive is explained by NIFTY(X) balance 86% is error. Error here is due to variables which aren’t in the model.
F is 5.50 the P-Value for which is 0.02 which is more than 0.01 which means overall the model is statistically significant.
Conclusion
As from the abovementioned regression equation it can be observed that the Beta is 0.825 which is less than 1 which states the fact that it is NOT good for investment in short term.