Topic Name: Relationship of Larsen and Toubro Ltd. with NIFTY.
Author: Lekha Karnik
Roll No- 0222025
Introduction: Larsen & Toubro Limited, commonly known as L&T, is a prominent Indian multinational conglomerate that has been a stalwart in the business landscape since its inception in 1938. With its headquarters situated in Mumbai, India, L&T has evolved into one of the nation’s most esteemed companies, boasting a diverse portfolio spanning engineering, construction, manufacturing, information technology, and financial services. The company’s operations extend across key sectors such as Engineering & Construction, Infrastructure, Heavy Engineering, Electrical & Automation, IT & Technology Services, Financial Services, and Developmental Projects. Recognized for its prowess in engineering and construction, L&T has significantly contributed to India’s infrastructure with projects ranging from roads and bridges to industrial facilities and airports. Beyond its borders, L&T holds an international presence, undertaking ventures on a global scale. Fostering innovation and sustainability, the company is dedicated to environmentally conscious practices and resource efficiency. L&T’s legacy is one of quality, engineering excellence, and ethical business conduct, making it an integral driver of India’s economic progress and infrastructure development.
Objective: To calculate beta of Larsen and Toubro Ltd. and find out its significance.
Views and Reviews: Larsen & Toubro (L&T) had a diverse group of directors A M Naik Group of chairman, S. N Subrahmanyam CEO who played vital roles in the company’s governance and decision-making. They also play a crucial role in overseeing risk management, financial performance, and the company’s long-term sustainability.
Data Collection: The data from 1/7/2022 to 30/6/2023 for this period has been downloaded from the NSE site, and weekly closing prices were found out. Then the weekly return of Nifty and the weekly return of Larsen and Toubro Ltd. were calculated. Nifty returns were taken as X & Larsen and Toubro returns were taken as Y. Y was regressed on X.
Data Analysis: Equation: “Y= -0.8351-0.0690 (X)”
t stat = -0.2631
N= 50, R2 = 0.0014, F= 0.0692, Beta = -0.0690
The above equation shows the relationship between the closing price of Nifty 50 (x) and the closing price of Larsen and Toubro Ltd. The negative sign means negative relationship, meaning if X rises Y fall and vice versa. If X rises by one unit Y falls by -0.0690 units. N means there are 50 observations. Figure in bracket is T stat for (B -0.0063). So, B is statistically significant at 5% level. R2 is 0.0014 of Y is explained by X and balance 86 is error due to the variables which are not in model. F is 0.0692 which is less than the table value so overall the model is statistically not significant at 5% level.
Conclusion:
Since Beta is -0.0690 which is less than 1 so Larsen and Toubro ltd share is good for long term investment.