A Regression Analysis of Kajaria Ceramics and Nifty

Author: Kislay Singh

 

Introduction:

Kajaria Ceramics is a renowned name in the world of tiles and ceramics. Established in 1988 by Ashok Kajaria, it has grown into one of India’s largest manufacturers and distributors of ceramic and vitrified tiles. Headquartered in New Delhi, the company has consistently set benchmarks in the industry through its innovative designs, superior quality, and technological advancements.

 

Objective:

To Calculate Beta(β) and its Significance.

 

Views/Reviews:

1. Ashish Kacholia, a renowned investor, and portfolio manager, said that he is impressed by the growth and profitability of Kajaria Ceramics Ltd. He said that he likes the company’s strong brand, distribution network, product innovation, and customer loyalty. He also said that he expects the company to benefit from the revival of the real estate and construction sectors in India.

 

1. Sandeep Jain, the director of Trade Swift Broking, said that he is positive about Kajaria Ceramics Ltd because it is a quality company with a sound financial position and a consistent track record. He said that he thinks the company will continue gaining market share from the unorganized players and improve its operational efficiency and cash flow generation.

 

 

Data Collection:

• Firstly, I visited the NSE website.

 

• Then, I clicked on the Historical Data option under the Data and Reports section.

 

• I downloaded the data of Kajaria Ceramics Ltd and the Nifty 50 index from 01-Nov-2022 to 31-Oct-2023 in Excel format.

 

• In the end, I sorted the data in Excel for analysis.

 

 

Data Analysis:

The regression equation has the form:

Y = a + b*X

Where Y is the dependent variable, X is the independent variable, a is the intercept, and b is the slope.

In our case, Kajaria Ceramics is the dependent variable and Nifty 50 is the independent variable.

Intercept, a = 0.4154

Slope, b = 0.4876

So, the regression equation is given by

Y (Kajaria Ceramics) = 0.4154 + 0.4876 * X (Nifty)

The above equation shows us the relationship between Kajaria Ceramics and Nifty. The positive sign indicates that if Nifty rises then the price of Kajaria shares will also rise and vice-versa. If Nifty rises by 100 points, then Kajaria shares will rise by 48.76.

The t-stat for b (Co-efficient of Nifty) is 1.3188 and the P-value is 0.1936 which means that the coefficient of Nifty is not significant at the 0.05 level, as the p-value is greater than 0.05. This implies that Nifty has no significant effect on Kajaria Ceramics, and their relationship is weak or non-existent.

The number of observations is 49. R^2 is 0.035 which indicates that the model only explains 3.5% of the variation in the price of Kajaria Ceramics. This means that the model is not a good fit for the data, and other factors affect the price of Kajaria Ceramics more than the price of Nifty 50. 

 

Conclusion:

The beta (β) for our Case is 0.4876.

A beta of 0.4876 for the above Nifty and Kajaria regression model indicates that the price of Kajaria Ceramics is less volatile than the price of Nifty 50. It means that for every 1% change in the price of Nifty 50, the price of Kajaria Ceramics changes by 0.49%. It also means that Kajaria Ceramics has a lower risk and expected return than Nifty 50.

 

References:

1. Kajaria Ceramics Reviews by 401 Employees | AmbitionBox                                                                                                           
2. Elaborative SWOT Analysis of Kajaria Ceramics – 2023 | IIDE