TITLE: Relationship Between Nifty & Vodafone Idea Equity
AUTHOR: VAIBHAV KUMAR
INTRODUCTION OF COMPANY:
Vodafone Idea or Vi (stylized as V!) is an Indian mobile network operator with its headquarters based in Mumbai and Gandhinagar. It is an all-India integrated GSM operator offering 2G, 4G, LTE Advanced, VoLTE, 5G and VoWiFi service. As of 31 September 2023, vi has a subscriber base of 219.8 million, making it third largest mobile telecommunications network in India and 11th largest mobile telecommunications network in the world. ‘Vodafone Idea Limited’ was created on 31 August 2018 by the merger of Vodafone India and Idea Cellular. In 2020, the two separate brands Vodafone India and Idea Cellular rebranded as Vi.
OBJECTIVE: To Calculate Beta and its Significance
VIEWS/REVIEWS:
CNBC TV-18 had reported on October 5 that tower company Indus Tower had written to the Telecom Regulatory Authority of India (TRAI) on Vodafone Idea’s failure to meet its contractual payments. According to the report, Indus Towers said this failure to make payments had significantly affected Indus Towers, causing serious financial and operational problems. This non-payment has severely impacted cash flow, working capital, and overall financial performance
According to Siddhartha Khemka, Indian markets initially underperformed the global rally due to disappointment over government stimulus measures. However, after a week, they joined the global uptrend, driven by short covering in sectors like banking and financials, and increased buying in metals and global cyclicals. The monthly expiry also played a role, with sectors having significant short positions witnessing a rebound. Positive factors included the reopening of global economies and discussions of additional stimulus from countries like Japan and the US.
DATA COLLECTION:
- Firstly, I visited the NSE website.
- Then I clicked on the Historical data option under the Data and Reports section.
- I downloaded the data of Vodafone Idea and nifty 50 index from 1st November,2022 to 31st October 2023 in excel format.
- In the end, I sorted the data in excel for Analysis.
DATA ANALYSIS:
The regression equation has the form.
Y= a+ b*x
Where, Y is the dependent variable, X is the independent variable, a is the intercept and b is the slope.
In our case, Vodafone idea is the dependent variable and Nifty 50 is the independent variable.
Intercept, a = 0.00487
Slope, b = 2.134
So, the regression equation is given by-
Y (Vodafone Idea) = 0.00487 + 2.134*X (Nifty50)
The above equation shows us the relationship between Vodafone Idea and Nifty. Positive sign indicates that if the Nifty rises then the price of Vodafone Idea will also rise and vice versa. If Nifty rises by 100 Points, then Vodafone Idea shares will rise by 213.4.
T-stat for b(Co-efficient of Nifty) is 3.6686 and the P value is 0.00062 which means that the coefficient of Nifty is significant at the 0.05 level, as the p-value is less than 0.05. This implies that Nifty has significant effect on Vodafone Idea and the relationship between them is strong.
The number of observations is 49. R^2 is 0.2226 which indicates that the model explains 222% of the variation in the price of Vodafone Idea. This means that the model is very good for the data, and there are no other factors that affect the price of Vodafone Idea.
Conclusion:
Beta(β): for our case is 2.134
A beta of 2.134 for the above Nifty and Vodafone Idea regression model indicates that the price of Vodafone Idea is more Volatile than the price of Nifty 50. It means that for every 1% change in Price of Nifty 50, the price of Vodafone Idea will change by 2.134%. It also means that Vodafone Idea has lower risk and expected higher return. So, an investor can invest in Vodafone Idea for short term.
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