TITLE: Relationship Between Nifty & TATA Motors Equity
AUTHOR: TIRTH SHAH
INTRODUCTION OF COMPANY:
Tata Motors a USD 42 billion organization, is a part of USD 128 billion Tata Group founded in year 1945. They are leading global automobile manufacturers of cars, utility vehicles, pick-ups, trucks, and buses. They are India’s Market leader in commercial vehicles and amongst the top three in the passenger vehicles market. They prioritize human centricity with technological prowess and engineering excellence to make cargo and passenger mobility safer, smarter, and greener. Their vision is “To become the most aspirational Indian Auto brand by 2024.”
OBJECTIVE: To Calculate Beta and its Significance
VIEWS/REVIEWS:
Prabhudas Lilladher, Owner of well-known stock broking company said that TATA Motor’s consolidated revenue was higher than the Consensus estimates. Moreover, solid performance of JLR and India CV business boosted margin beat. JLR’s volume improvement along with better mix will likely continue and may result in guidance upgrade in coming quarters. Benefits from better product mix should continue help to increase share price. Also, lower discounts at CV should help margins and TTMT is confident of maintaining its lead in SUVs. So, he recommended to buy TATA Motors with target price of Rs.785.
According to Billionaire Rekha Jhunjhunwala, who inherited a multi-billion portfolio there are three stocks giving multibagger returns in 2023. In those 3 stocks TATA Motors is one among them and according to her analysis stock of TATA Motors will rise by 138% in calendar year 2023
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 TATA Motors and nifty 50 index from 1st November,2022 to 31st October 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, TATA Motors is the dependent variable and Nifty 50 is the independent variable.
Intercept, a = 0.0079
Slope, b = 1.2045
So, the regression equation is given by-
Y (TATA Motors) = 0.0079 + 1.2045*X (Nifty50)
The above equation shows us the relationship between TATA Motors and Nifty. Positive sign indicates that if the Nifty rises then the price of TATA Motors will also rise and vice versa. If Nifty rises by 100 Points, then TATA Motors shares will rise by 120.45.
T-stat for b(Co-efficient of Nifty) is 3.299 and the P value is 0.0018 which means that the coefficient of Nifty is significant at the 0.05 level, as the p-value is less than 0.05. This implies that Nifty has significant effect on TATA Motors and the relationship between them is strong.
The number of observations is 49. R^2 is 0.188 which indicates that the model explains 188% of the variation in the price of TATA Motors. This means that the model is very good for the data, and there are no other factors that affect the price of TATA Motors.
Conclusion:
Beta(β): for our case is 1.2045.
A beta of 1.2045 for the above Nifty and TATA Motors regression model indicates that the price of TATA Motors is more Volatile than the price of Nifty 50. It means that for every 1% change in Price of Nifty 50, the price of TATA Motors will change by 1.2045%. It also means that TATA Motors has lower risk and expected higher return. So, an investor can invest in TATA Motors for short term and long term as well.
REFERNCE:
