Relationship of Nestle India Limited with Nifty 50
Author–
Nayan Agrawal
Introduction-
About Nestle India Limited–
Nestlé India Limited is the Indian subsidiary of Nestlé which is a Swiss multinational company. The company is headquartered in Gurgaon, Haryana. The company’s products include food, beverages, chocolate, and confectioneries.
Vision of Nestle India Limited –
To be a global, competing Nutrition, Healthcare, and Wellness Company producing greater value for shareholders by being a chosen responsible company, chosen employer, preferred partner, and chosen seller of products/ services
Products-
Their various products are-
- Maggi
- Nescafé
- Mailkmaid
- Cerelac
- Kitkat
- Polo
- Nestea
Objective of the report-
To calculate beta and find its significance.
Views and Reviews–
- CEO Mark Schneider said on Friday, “The investment would be on capex (capital expenditure), setting up new plants, acquisitions and expansion of the product portfolio of the company. Nestle, which currently operates 9 plants across India is also looking at new locations to set up manufacturing capacity.”
- Nestle India Chairman and Managing Director Suresh Narayanan said that “It is definitely a highly accelerated plan that we are looking at. This has three pivots” such as continuing the strong momentum of growths that the company has in last 22 quarters.”
Data Collection–
- In order to analyse the relationship between Nestle India Limited and Nifty 50’s performance, data on their weekly closing prices was collected from the NSE India website for the period between October 1st, 2022, and September 30th, 2023.
- Their Friday closing price is calculated.
- Subsequently, returns were calculated for both Nestle India Limited and Nifty 50 by expressing the change in their weekly closing prices as a percentage of the previous week’s value.
- Finally, a regression analysis was conducted to investigate how the returns of Nestle India Limited (dependent variable, y) are influenced by the returns of Nifty 50 (independent variable, x).
- This approach allows us to quantify the extent to which Nestle India Limited performance is linked to the broader market movement represented by Nifty 50 and to take decision whether to invest in long term or not.
Data Analysis-
The mathematical relationship between Nestle India Limited (Y) and Nifty 50’s returns (X) is expressed as:
Return of Nestle India Limited = 0.197017+0.518632* (Return on Nifty 50)
(t stat = 2.394314)
Number of Observations (N): 49
R-Square: 0.108713
F-Statistic: 5.73274
P-Value: 0.020693
Interpretation-
- The above equation shows the relationship between return of nifty 50 index and return of Nestle India Limited.
- Return of Nestle India Limited being the dependent variable and Return of Nifty 50 index being the independent variable.
- Positive sign means if nifty 50 index rises, Nestle India Limited share also rises.
- If Nifty 50 rises by 1 unit or 1 rupee, Nestle India Limited share will rise by approx..0.518632 units and vice-versa.
- Number of observations are 49.
- T-stat for beta (coefficient of return on nifty 50) is 2.394314. The p value for this is 0.020693 which means return of Nifty 50 is statistically significant for return of Nestle India Limited at 5 % level.
- R square is 0.108713 which means approx. 11% of variance in return of Nestle India Limited share is explained by return of Nifty 50 meaning 88% is the error due to the variables which are not in the model.
- F is 5.73274 & P value for this is 0.020693 which means overall the model is statistically significant at 5% level.
Conclusion-
As beta is more than 1, It is good for short term investment.
References-
https://www.nseindia.com/reports-indices-historical-index-data
https://www.nseindia.com/get-quotes/equity?symbol=NESTLEIND