Title: Relationship of Nestle India with Nifty Index
Author: Nitesh Rajendra Nalawade
Introduction: – Nestlé India Limited is the Indian subsidiary of Nestlé which is a Swiss multinational company. The company is headquartered in Gurgaon, Haryana. The company’s products include food, beverages, chocolate, and confectioneries.
Objective: – To calculate beta and find its significance.
Views: –
Chairman and MD of Nestle India, Suresh Narayanan, said that Bharat or rural India is discovering Nestle brands, and the company is seeing secular growth across all geographies. He cited that the annual penetration of Maggi Noodles, for example, is 80-85%, while coffee’s is 30-40%, and there is still low penetration in many of the company’s categories. Narayanan also announced that the company invested Rs 2,130 crore in H1-2023.
Nestle India Ltd on July 27 reported a consolidated net profit of Rs 698.34 crore for the June quarter of FY24, up 36.8 percent from Rs 510.24 crore a year ago.
Data collection: – Data was downloaded from the website nseindia.com. Data was extracted for the period 1-11-22 to 31-10-2023, and all the data except the data and closing price for the end of the week were excluded. The returns were calculated with the previous week’s return as the base.
Weekly returns of Nifty = X
Weekly returns of Nestle India Equity = Y
Linear Regression was carried out.
Data Analysis: –
The regression equation is Nestle India LTD = 0.315576 + 0.348481Nifty
The above equation shows the relationship between Nestle India and Nifty Index. Equity is the dependent variable and Nifty is the independent variable. The correlation is 0.240881. The positive sign indicates that, if Nifty rises Equity also rises, and vice versa. If Nifty rises one unit i.e., Nifty rises by one rupee then Equity will rise by 34% paise. t-stat for b (co-efficient of Nifty) is 1.70 and the p-value is 0.095. Number of observations are 50. R squared is 0.058, which means less than 5.80% of change in Equity is explained by Nifty, which means 95% is the error due to variables, which are not included in the model. F is 2.89 and the p-value is 0.0.095, which means the overall model is statistically significant at an 89% level.
Conclusions:
Beta is 0.348
Since Beta is 0.348 which is less than 1, it is advisable to invest for a long time as it is less volatile.
References:
[1] https://economictimes.indiatimes.com/markets/expert-view/bharat-is-discovering-nestle-brands-there-is-secular-growth-suresh-narayanan/articleshow/102297445.cms
[2] https://www.moneycontrol.com/news/business/earnings/nestle-net-profit-jumps-37-to-rs-698-34-crore-11039551.html