Relationship between Nifty50 and Steel Authority of India limited Equity

Author: Siddhartha Mallick

Roll number: 21230023246 (Batch: F1)

 

Introduction:

          Steel Authority of India Limited (SAIL) is one of the largest steel-making companies in India and one of the ‘Maharatnas’ of the country’s Central Public Sector Enterprises. SAIL produces iron and steel at five integrated plants and three special steel plants, located principally in the eastern and central regions of India and situated close to domestic sources of raw materials. The Government of India owns about 65% of SAIL’s equity and retains voting control of the Company. However, SAIL, by virtue of its ‘Maharatna’ status, enjoys significant operational and financial autonomy.

Objective:

           The objective of the analysis is to determine the regression equation between two variables i.e. returns of Nifty 50 and returns from equity of SAIL.  Another objective is to determine the value of ß (Beta) which is the coefficient of variable X, which denotes the relationship between dependent and independent variables.

Views and Reviews:

  • SAIL declines on profit-booking after swinging into black in Q2. The company’s total income jumped 12 percent on-year to Rs 29,858.19 crore in Q2FY24, while expenses were flat at Rs 27,768 crore. – MONEYCONTROL

NEWS.https://www.moneycontrol.com/news/business/markets/sail-declines-on-profit-booking-after-swinging-into-black-in-q2-11732651.html

  • The budget announcement for industry as a whole looks positive. The development of infrastructure in the Country has been given further emphasis in this interim budget as well. Sectors like railways, roadways and waterways remain the focus areas of growth. Budget allocation for expanding the railway infrastructure, improving connectivity through Pradhan Mantri Gram Sadak Yojana and scaling up the Sagar Mala project are all indications for more steel consumption in the country. – Shri Anil Kumar Chaudhary ( SAIL Chairman)

https://sail.co.in/en/sail-news/reaction-union-budget-2019-chairman-sail-shri-anil-kumar-chaudhary

 

Data collection:

          There are two parts in the data collection:

  1. Collecting the historical data of Nifty50 from the website of NSE India from 01/11/2022 to 31/10/2023. After collection of the entire data of the given time period only the data of Fridays are taken by sorting the whole data. According to the closing data of Nifty 50 of the time period, return values are collected using the formula of return.
  2. Collecting the historical data of equity (Steel Authority of India Limited) from the website of NSE India from 01/11/2022 to 31/10/2023. After collection of the entire data of the given time period only the data of Fridays are taken by sorting the whole data. According to the closing data of Nifty 50 of the time period, return values are collected using the formula of return.

Analysis:

            The summary output is the result of the regression performed in MS Excel on the two variables which are Nifty 50 returns (Variable X) and SAIL returns (Variable Y). From the  summary output, we can write down the equation:

Y= A+ ß*X

Y= 0.07257+ 0.105288*X

Y= Weekly returns of SAIL, X= Weekly returns of Nifty50

Interpretation:

  • The above equation shows us the relationship between returns of Nifty50 and returns of SAIL. Here weekly returns of SAIL is dependent variable and the returns of Nifty50 is the independent variable. The ‘+’ sign in the equation means if the returns of Nifty rises, the returns of SAIL also rise. Here in the equation, if the returns of Nifty rise by 1 unit, the returns of SAIL rise 10 paisa.
  • T stat for B (Coefficient of Return on Nifty) is 0.250 and the P value is 0.8030, which means returns of Nifty is statistically not significant for return of SAIL at 1% level because here significance level (F) is 0.8030 which is not less than 0.05. So null hypothesis will be accepted. Here no. of observations is 49. R2 is 0.001, which means 0.1% of return of SAIL is explained by return of Nifty. Here standard error is 49% means error due to the variables which are not in the model. F is 0.06 and P value of is 0.80 which means overall model is statistically not significant at 1% significant level.
  • It is Null hypothesis.

Conclusion:

            If ß is 1 or more than 1 then it is suitable for short term investment and if ß is less than 1 then it is better for long term investment.

            Here ß is 0.105 so it is less than 1 and it is long term investment.

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