Relationship between Nifty 50 index Returns and PC Jewelers equity returns
Author: Pooja Almal
( Div A, Roll no – 15, SAP ID – 80012100143)
Introduction
Investments in financial markets are critical to accumulate wealth for any individual. When investors have an understanding of the factors that affect their equity returns, they can make informed decisions. Among the many factors, the relationship between the equity’s and the market indices are critical. This paper studies the relationship of equity stock, PC Jeweler with the Nifty 50 market index returns.
Views and Reviews
Some research analysts have a positive view of the PC Jeweler stock, after the Russia- Ukraine war, Russia has begun the exports of the polished diamond again. The import prices of uncut diamonds has also been reduced. Since, India is one of its biggest importers, jewelry business in India will revive. Hence, PC Jeweller stock can see momentary upside. Some analysts have a negative view on the stock. Losses on PC Jewellers P&L have risen from the previous year, hence limited upside.
Objective
This research aims to understand if there is a relationship between Nifty 50 index returns and the PC Jeweler equity returns. This research paper examines the beta value for Nifty returns and to test its significance. Further, aim to understand how much of the variation in the stock returns is explainable by the index returns.
Data Collection :
The closing prices of the equity and index for the past one year are collected as historical data from the National stock exchange, India website. Based on the closing prices, the weekly returns are calculated for the equity and index.
Data analysis :
Returns of PC Jeweler = – 0.0125 + 1.9036 returns of Nifty 50
(5.5730)
N= 47, R Square = 0.4084, F value = 31.05
The above equation explains the relationship between PC Jeweller and Nifty 50 returns over the past one year. the positive sign indicates that there is a direct relationship. If Nifty 50 index rises, then PC Jeweller stock value also rises. If Nifty 50 return rises by 1 percentage point, then PC jeweler Return rises by 1.9036% points. The figure in the bracket is 5.5730, which refers to the T-statistic for Beta. Since this value is less than the table value, the beta value is not statistically significant. The R Square value is .4084, which means that only 40.84% of the variation in returns of PC Jeweller stock is explained by the Nifty 50 Returns. Hence, there are other fundamental reasons that affect the returns of the PC Jeweller stock. The F-value is 31.05 which is more than the table value. Hence, the overall model is statistically significant at 5% confidence level.