Title: Calculation of Beta of Sun Pharmaceuticals ltd and its significance
Author: Sukhin Naphade
Introduction: Sun Pharmaceuticals Ltd (Sun Pharma), Sun Pharmaceutical Industries Limited is an Indian multinational pharma company headquartered in Mumbai, that manufactures and sells pharmaceutical formulations and pharmaceutical ingredients in more than 100 countries across the globe. It is the largest pharmaceutical company in India and the fourth largest specialty generic pharmaceutical company in the world. The products cater to a vast range of therapeutic segments covering psychiatry, anti-infectives, neurology, cardiology, diabetology, gastroenterology, ophthalmology, nephrology, urology, dermatology, gynecology, respiratory, oncology, dental and nutritional.
Objective: To calculate Beta of Sun Pharmaceuticals Ltd and its significance.
Data Collection: Data of Sun Pharmaceuticals Ltd from 01-12-2021 to 30-11-2022 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 Sun Pharma= 0.718+0.065 Weekly return of nifty +E
• t-stat = 0.307
• R2 = 0.002
• F = 0.094
• N = 49
• The above equation tells us about the relationship between Weekly Return of Sun Pharma ltd and Weekly Return of Nifty. The positive sign means that there is a direct relationship. If nifty rises, equity rises and if nifty falls, equity falls. The co-efficient of weekly return of nifty is 0.065, which means if nifty rises by 1 unit, Sun Pharma Ltd equity will rise by 0.065 units and vice versa.
• Number of Observations are 49 and t-stat is 0.307.
• P value is 0.759, which is more than 0.05, means that b is not statistically significant at 5%. Even it is more than 0.01, b is not statistically significant at 1% level.
• R2 is 0.002, which means that 0.2% of Y (Sun Pharma) is explained by X (nifty), balance of 98.8% is error. Error is due to the variables which are not in the model.
• F is 0.094, the P value for which is more than 0.01, means overall the model is not statistically significant.
Conclusion:
Since b = 0.065 is smaller than 1, it is not statistically significant.
Sun Pharma Ltd. is not a good option for investment because for every increase in nifty there will not be a significant increase in the equity of Sun Pharma.