Title- Relationship between Nifty 50 Index and Nestle India Limited
Author– Nicole Dsouza
Batch: F2
Roll No:21230023057
Introduction
Nestle India Limited, a household name synonymous with food and beverage in India, is a subsidiary of the Swiss multinational Nestle SA. Established in 1912, it’s come a long way from importing condensed milk to becoming a major player shaping the country’s food landscape.
Nestle India boasts a diverse portfolio of over 2000 brands, ranging from global icons like Maggi and KitKat to local favorites like Muncha! It caters to various taste buds and dietary needs, from instant noodles and chocolates to dairy products and beverages.
With a strong focus on research and development, Nestle India constantly innovates to adapt its offerings to the evolving preferences of Indian consumers. It also prioritizes sustainability and social responsibility, striving to create shared value for its stakeholders and the communities it operates in.
Objective:
To find Out Beta and its Significance
Views and Reviews
- “Nestle India’s consistent profit growth and focus on premiumization are impressive. Their rural market penetration and digital marketing strategy are spot-on. I see them as a strong competitor in the coming years, especially in health and wellness segments.” – CEO of a leading food and beverage competitor.
- “Nestle India’s market dominance and profitability are undeniable. However, their size can make them inflexible. I’m curious to see how they respond to the rise of smaller, nimble players in the health and organic segments. Still, a formidable force to be reckoned with.” – CFO of a regional food company
Data Collection
The data for the analysis was collected from the historical data of the Nifty 50 Index and Nestle India Limited from NSE India.com and further the data was classified into the date from 1/10/22 to 30/9/23, the weekly closing balance was then considered ,then the returns were calculated of both the Nifty 50 index (X: Independent Variable) and Nestle India Limited (Y: Dependent Variable) in the table form on excel and then lastly considering the returns of both we found the regression.
Few other details taken into consideration while collecting data were:
- After the collection of the entire data of the given time period ,only the data of Fridays were taken by shorting the whole data.
- According to the closing data of Nifty 50 of the time period, return values are collected using the formula as given below:
Weekly Returns = Closing price of end of the week – Closing price of beginning of the week/Closing price beginning of the week*100
Data Analysis
The Regression Equation for the Data is-
Y= 33382.99 – 0.69373x
The regression equation Y=33382.99 – 0.69373x represents a relationship between two variables, where Y is the dependent variable and x is the independent variable.
The intercept of 33382.99 suggests that when the independent variable (x) is equal to zero, the predicted value of the dependent variable (Y) is approximately is -0.69373. However, in some contexts, it’s essential to consider whether a value of zero for the independent variable is meaningful and within the observed range of the data.
The beta value of -0.69373 suggests that for every one-unit increase in the independent variable (x), the predicted value of the dependent variable (Y) is expected to decrease by approximately 0.69373 units. This indicates a negative linear relationship between the variables, implying that as one variable increases, the other tends to decrease. The stock has a weak negative correlation with the market. The stock’s movements are somewhat independent of broader market trends but still exhibit a slight inverse tendency. It might not provide as strong a hedge as a strongly negative beta stock but it could still offer some diversification benefits.
Number of observations are 49
7.554131931 is the t-stat for Y, the p-value for which is 1.1875980
R square is 0.150108941 which means 15.01% of variances in Nestle India Limited are explained by Nifty.
Conclusion
Here the beta is -0.69373 which is less than 1, may exhibit a relatively lower volatility compared to the market. The negative beta implies a potential inverse relationship with the market, indicating that the stock might perform differently from the overall market trends. It’s advisable to consider additional factors and conduct a comprehensive analysis before making investment decisions.
Reference
Source of data is collected from NSE India.com