Relationship of MRF Limited shares with NIFTY50
Author: Mitali Mane (Roll no: 0222035)
Introduction: MRF Limited, a well-known company in the tire industry, is a symbol of quality and innovation. The company, which was founded in India, has gained a global name for its remarkable selection of tires across several segments. MRF has a long history of pushing the frontiers of tire technology, providing superior performance, durability, and safety to clients all over the world. Its dedication to research, development, and customer satisfaction has cemented its position as a market leader in the highly competitive worldwide tire business.
Objective: To calculate the Beta of MRF Limited and observe its significance.
Views and Reviews: “In FY23, we recorded an all-time high consolidated total income of Rs 23,261 crore, an increase of Rs 3,627 crore over the previous year. One of the resounding successes of last year was the launch of our Scooter tyre Zapper C1. It has received an excellent response from the customers and has helped in increasing our two-wheeler tyre sales,” K M Mammen, Chairman & Managing Director of MRF, said in the report.
“The company will address the challenges posed by the shift to electric and other vehicles. To cater to the EV market, technologies are being developed, and progress has been made,” KM Mammen, Chairman and Managing Director of the company, said while responding to the queries of the shareholders during the 62nd annual general meeting of the company.
Data Collection: The data for the period 01-07-2022 to 30-06-2023 has been downloaded from the NSE India site and weekly closing prices were found out. Then, the weekly return of NIFTY50 and the weekly returns of MRF Limited were calculated. NIFTY50 returns were taken as X and MRF Limited equity returns as Y. Y was regressed on X.
Data Analysis:
Y= -0.0075+0.3212X
(tstat 1.0402)
N=50, R2= 0.0220, F= 1.0820
Beta = 0.3212
Interpretation: The above equation shows the relationship between NIFTY50 (X) and MRF Limited (Y). The positive sign indicates a positive relationship, meaning if “X” rises, “Y” rises, and vice versa. If “X” rises by one unit, “Y” rises by 0.3212 units. N means there are 50 observations. Figure in bracket (1.0402) is Tstat for B. So B is statistically significant at the 5% level. R2 is 0.0220 which means 2.20% of Y is explained by X, balance 97.3 is an error due to the variables which are not in the model. F is 1.0820 which is more than the table value, so overall the model is statistically significant at 5% level.
Conclusion: Since Beta is less than 1, MRF Limited shares are good for long-term investment.