TITLE: Relationship of Nifty and Dr.Reddy’s Laboratories
AUTHOR: Diksha Magoo
INTRODUCTION: Dr. Reddy’s Laboratories is an Indian multinational pharmaceutical company located in Hyderabad, Telangana, India. The company was founded by Kallam Anji Reddy, who previously worked in the mentor institute Indian Drugs and Pharmaceuticals Limited. Dr. Reddy’s manufactures and markets a wide range of pharmaceuticals in India and overseas. The company has over 190 medications, 60 active pharmaceutical ingredients (APIs) for drug manufacture, diagnostic kits, critical care, and biotechnology products.
Dr. Reddy’s began as a supplier to Indian drug manufacturers, but it soon started exporting to other less-regulated markets that had the advantage of not having to spend time and money on a manufacturing plant that would gain approval from a drug licensing body such as the U.S. Food and Drug Administration (FDA).
OBJECTIVE: To calculate Beta Value of Dr.Reddy’s Laboratories and find its significance.
VIEWS AND REVIEWS:
Pharma major Dr. Reddy’s Laboratories, for which Russia and CIS region count among important, growth markets, is closely monitoring developments amid the escalating tensions between Ukraine and Russia. Noting that Dr. Reddy’s have had a strong presence in the region for over three decades, the spokesperson said “ensuring well-being of our staff is the first and foremost priority, along with meeting patient needs and business continuity.”
The stock of the pharmaceutical company, which has a significant presence in the Russian market, has fallen below its previous low of Rs 4,135.90 touched on March 19, 2021. In the past one month, it has underperformed the market by falling 10 per cent as compared to 5 per cent decline in the S&P BSE Sensex. In September 2020, Dr. Reddy’s had signed up with the Russian Direct Investment Fund (RDIF) Russia’s sovereign wealth fund to cooperate on clinical trials and distribution of Sputnik V vaccine in India. Upon regulatory approval in India, RDIF had committed to supply 100 million doses of the vaccine to Dr. Reddy’s.
DATA COLLECTION: The data of NIFTY and Dr.Reddy’s Laboratories was collected through NSE Website and was downloaded from 1-March-2021 to 28-February-2022 in an excel sheet. The closing prices were found out. The data was then filtered on weekly basis and then weekly returns of both NIFTY and Dr.Reddy’s Laboratories was calculated. The company returns have been regressed on nifty’s returns.
DATA ANALYSIS:
Y=Intercept+BetaX1
Y = 0.246111 – 0.0733518X
N=47, R Square= 0.017054, F= 0.075166
Tstat(beta)= 0.246111
Tstat = -0.073351
The above regression equation tells us the relationship between X and Y. Where X is NIFTY’s weekly returns and Y is Dr.Reddy’s Laboratories weekly returns.The negative sign of Beta tells us the that there is an inverse relationship between NIFTY and Dr.Reddy’s Laboratories weekly returns. From the equation, it can be seen that if X rises by 1 unit, Y will fall by 0.0733518 units. T calculated is more that T tabulated which means, β is statistically significant at 5% confidence level. R^2 is 0.01705 which means 1.7% of Y is explained by X. And the balance is explained by error. F is 0.751 which is less than table value which means model is Insignificant.