Relationship Between Nifty and REC Limited.
Author: Rohan Zawar
Introduction: REC is a ‘Maharatna’ company under the administrative control of the Ministry of Power, Government of India, and is registered with RBI as Non-Banking Finance Company (NBFC), Public Financial Institution (PFI) and Infrastructure Financing Company (IFC).
REC was incorporated in 1969 in the backdrop of severe drought and famine in the country, to energize agricultural pump-sets for irrigation purposes, thereby reducing the dependency of agriculture on monsoons. From its humble beginnings, REC has evolved and expanded its financing mandate to cover the entire Power-Infrastructure sector comprising Generation, Transmission, Distribution, Renewable Energy and new technologies like Electric Vehicles, Battery Storage, Green Hydrogen etc. More recently REC has also diversified into the Non-Power Infrastructure sector comprising Roads & Expressways, Metro Rail, Airports, IT Communication, Social and Commercial Infrastructure (Educational Institution, Hospitals), Ports and Electro-Mechanical (E&M) works in respect of various other sectors like Steel, Refinery, etc.
Objective: To calculate beta and find its significance.
Views & reviews: REC has TTM P/E ratio 8.40 as compared to the sector P/E of 12.57. There are 6 analysts who have initiated coverage on REC. There are 4 analysts who have given it a strong buy rating & 1 analysts have given it a buy rating.
Data Collection: Nifty and Bank of Baroda’s closing price was collected from NSE website. The weekly return of Nifty is termed as “X” and weekly return of REC Limited is termed as “Y”. Besides that, a few other things written in this report are taken from other websites and its information is provided in references.
Data Analysis:
Equation: Y=-1.75862+0.70831x
Interpretation:
The above equation shows the relation between Nifty50 and REC Limited.
Return of REC Limited is dependent variable and return of Nifty50 is independent variable.
A positive sign means if Nifty50 rises by 1 unit then the share price of REC Limited will also rise by 0.039962731 and vice-versa.
The number of observations are 49.
-2.485565028 is the t-stat for Y, the p-value for which is 0.168459777.
R square is 0.039962731 which means 0.3% of variances in REC Limited are explained by Nifty.
F is 1.956432776, p-value for this is 0.168459777 which means model is statistically significant at 1% level.
Conclusion: Beta is -1.75862 which is less than 1, it means that the price of the security is less volatile and REC Limited is good for long term investment.
References:
https://www.nseindia.com/reports-indices-historical-index-data
https://www.nseindia.com/get-quotes/equity?symbol=RECLTD
https://www.moneycontrol.com/india/stockpricequote/finance-term-lending-institutions/rec/REC02