Title: Relationship between Nifty 50 and Larsen & Toubro Limited.
Author: Lalit Pareek
Introduction: Larsen & Toubro Ltd, abbreviated as L&T, is an Indian multinational conglomerate company, with business interests in engineering, construction, manufacturing, technology, information technology and financial services, headquartered in Mumbai & Technical services, headquartered in Chennai. The company is counted among world’s top five construction companies. It was founded by Henning Holck-Larsen and Søren Kristian Toubro, who were two Danish engineers taking refuge in India.
Objective: Calculate beta and find its significance.
Views and Reviews:
Prabhudas Lilladher is bullish on Larsen and Toubro has recommended buy rating on the stock with a target price of Rs 3437 in its research report dated November 01, 2023.
Larsen & Toubro (L&T) has been charged with two penalties worth Rs 111.31 crore and Rs 127.64 crore by Qatar’s income tax authorities citing variation in the income declared by the company against the authority’s assessment, the company said in an exchange filing on November 17.
The penalties have been imposed for the tax period between April 2016 to March 2017 and April 2017 to March 2018. “An appeal has been filed against the levy of this penalty as the company believes it is arbitrary and unjustified,” the L&T said
Data Collection: Data was downloaded from the website nseindia.com. Data was extracted for the period 1-10-22 to 30-09-2023, and all the data except the data and closing price for the end of the week excluded. The returns were calculated with the previous week’s return as the base.
Weekly returns of Nifty = X
Weekly returns of Larsen & Toubro Ltd. = Y
Linear Regression is conducted.
Data Analysis: L&T: -2920.06 + 0.28363 – Nifty 50
T-Stat: 10.85616
N: 50, R-square: 0.842967, F: 1.61, P-value: 1.61
The above equation shows the relationship between Nifty 50 and L&T Ltd., Axis bank is dependent variable and Nifty 50 is independent variable. The positive sign shows that is Nifty 50 rises L&T also rises and vice – versa.
If Nifty 50 rises by 1rs L&T will increase 0.98 paisa. Income is statistical at 1% level.
No. of. Observers are 50. R-square is 0.84 which means 84% of Axis Bank depends on Nifty 50. In other words, 16% is error which may be due to other variables which are not taken in the model. F is 1.61 and P-value is 1.61 which means overall, the model is statistically significant at 1% level.
Conclusion: Beta is 1.61 Since Beta is 1.61 which is MORE than 1, it is advisable to invest for a short term as it is less volatile.
References:
https://www.moneycontrol.com/news/business/qatar-charges-lt-with-tax-penalties-worth-rs-238-9-crore-11762851.html