Relationship between Nifty50 and Varun Beverages

Author: Vraj Naik

Introduction: Varun Beverages Ltd has been associated with PepsiCo since the 1990s and is a key player in beverage industry and one of the largest franchise of PepsiCo in the world. The company produces and distributes a wide range of carbonated soft drinks, non-carbonated drinks and packaged water sold under trademarks owned by PepsiCo.
PepsiCo brands produced and sold by the company include Pepsi, Seven-up, Mirinda Orange, Mountain Dew, Tropicana Juices and many more.

Objective: To calculate beta of Varun Beverages and its significance

Data Collection: Data of Varun Beverages (Varun Beverages Limited) from 01-12-2021 to 30-11-2022 downloaded from NSE website.
• Friday weekly closing prices has been found out
• Weekly Return have been calculated with the formula of (Y2-Y1)/Y1*100
• Weekly Return of Equity have been regressed on Weekly Return of Nifty
Data Analysis:
Weekly Return of = 0.838+0.356Weekly Return of Nifty + E
• t-stat = 0.991998071
• R2 = 0.020089396
• F = 0.984060175
• N = 50
The above equation tells us about the relationship between Weekly Return of Varun Beverages Weekly Return of Nifty. The positive sign means that there is a direct relationship. If nifty rises, Varun Beverages also rises and if nifty falls, Varun Beverages will also fall. The co-efficient of weekly return of nifty is 0.356, which means if nifty rises by 1 unit, Varun Beverages will also rise by 0.356 units and vice versa.

• Number of Observations are 50 and t-stat is 0.991998071
• P value is 0.326173028, which is more than 0.05, means that b is statistically insignificant at 5%. Even it is more than 0.01, b is statistically insignificant at 1% level
• R2 is 0.020089396, which means that 2.009% of Y (Varun Beverages) is explained by X (nifty), balance of 97.991% is error. Error is due to the variables which are not in the model.
• F is 0.984 , the P value for which is 0.326> 0.01, means overall the model is statistically insignificant.

Since b = 0.838 is less than 1, it is statistically insignificant.
Varun Beverages is a good option for investment because for every increase in nifty there will be an increase in the equity of Varun Beverages.