Author: Shivani Gajbhiye
Introduction: Saregama India Ltd. (Saregama refers to the first four notes of the Indian musical scale); formerly known as The Gramophone Company Of India Ltd. is India’s oldest music label owned by the RP- Sanjiv Goenka Group of companies. The company is listed on the NSE and the BSE with its head office located in Kolkata and other offices in Mumbai, Chennai and Delhi.
Objective: Relationship of SAREGAMA INDIA LTD with Nifty 50
Literature review:
(Domagoj Karacic & Ivana Bestvina Bukvic, 2014) Beta coefficient is a measure of the investment or asset’s systematic risk in relation to the overall stock market. It enables comparison of level of the risk of investments or assets with different characteristics. Value of the beta coefficient of the project can range between 0 and 4. The higher coefficient indicates proportionally higher risk in cash ” flows of the investment project. Risk free asset has a coefficient 0 since its covariance with the market portfolio is 0 (Gossy, 2008:35). If the result of the beta coefficient is 1, it means that the systemic risk of the project is equal to the risk that investor would take over if he invests its assets in a diversified portfolio of securities in the referenced market.
(Dębski Wiesław el 2016) Beta parameter in the contemporary analysis of the portfolio is used intensively in a variety of theoretical considerations and empirical studies of the portfolio management of financial investments (strategies to invest in stocks, risk management), valuation of assets, and estimating the cost of capital. This parameter, introduced by Sharpe (1963) is a slope coefficient of the linear regression model conditioning the return of shares from the stock index rate of return, which represents market portfolio. It informs about the degree of sensitivity of the rate of return of the tested shares in relation to 1% change in the rate of return of the market portfolio, and is commonly used to measure the systematic risk of shares.
Data collection: Data was collected from yahoo finance historical data, then it was manipulated by finding the Friday closing price. After that weekly returns for nifty and Saregama india ltd was calculated which was written as X & Y. By doing regression through data analysis.
Data Analysis:
Saregama india ltd Returns (Y)= 0.278 + 0.70 Nifty Returns (X)
( 8.025)
N= 51, R^2= 0.156, F= 50.317, Beta= 0.70
The above equation shows the relationship between X & Y. (+) sign means there is a direct relationship which implies that if X rises, Y also rises & vice versa. In this equation b=0.70, that is if X rises by 1 unit, demand (Y) will rise by 0.70 units. Hence b is statistically significant at 5% significance level.
R^2= 0.156, which means 15.6% of Y is explained by X, similarly F= 50.317 which is also greater than table value. Hence overall model is statistically significant at 5% Significance level.
Conclusion: since it can be seen that value of b (beta) is less than 1 which implies that Saregama india ltd is good for long term investment.
References
Domagoj Karacic & Ivana Bestvina Bukvic, 2014. “Research Of Investment Risk Using Beta Coefficient,” Interdisciplinary Management Research, Josip Juraj Strossmayer University of Osijek, Faculty of Economics, Croatia, vol. 10, pages 521-530.
Dębski Wiesław & Feder-Sempach Ewa & Świderski Bartosz, 2016. “Beta Stability Over Bull and Bear Market on the Warsaw Stock Exchange,” Folia Oeconomica Stetinensia, Sciendo, vol. 16(1), pages 75-92, December.