Relationship of NIFTY 50 with
Steel Authority of India Limited (SAIL)
Author – Salman Mohammad (Financial Markets)
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. SAIL manufactures and sells a broad range of steel products.
Objective of the study: – To calculate the Beta of SAIL and its significance.
Views and Reviews: –
- Amarendu Prakash (SAIL, Chairman): We had decided a few years back to work on two focus areas: to maximize capacity utilization and to provide the best value to our customers to safeguard against the vagaries of market cycles. This necessitated strategic interventions in ramping up of production, securing raw materials, improving the quality of inputs, reducing business risks over the long term in resource mobilization, and providing a better customer experience while focusing on Decarbonization and Sustainability. There were diverse and simultaneous challenges in areas like raw material prices, logistics, market volatility, and mining operations, but with cohesive teamwork and leadership, we were able to overcome the challenges to attain certain performance indicators which seemed di‑ cult some time back. We achieved this by critically working on the focus areas with a fresh perspective. I can assure you that we will continue to engage with stakeholders, improve our asset utilization, and proactively be ahead of the curve. The global business scenario, including that of the steel industry, was dominated by geopolitical factors and economic uncertainties during 2022-23. Business activities were adversely impacted by several macro-economic challenges like a global energy crisis, inflationary pressures, supply chain disruptions, interest rate hikes by central banks, and strict pandemic-related restrictions in China. The consequential outcomes of these adverse events had a significant impact on the steel industry by way of a contraction of steel prices and volatility in raw material prices, almost throughout the year. However, the steel industry in India was able to meet these challenges by focusing on domestic consumption which was backed by Government expenditure on infrastructure and manufacturing. Besides being the second-largest producer of steel in the world, India’s domestic consumption has reached a level of 120 million tones, the second highest in the World.
- Board of Directors Report: Your Company achieved the best Sales Turnover of `1,03,768 crore during the Financial Year (FY) 2022-23, which is higher by 1% as compared to corresponding period of last year (CPLY) mainly due to increase in Net Sales Realization (NSR) of Saleable Steel of 5 Integrated Steel Plants and marginal increase in Sales Volume (2%). During the FY 2022-23, the decline in the profitability as compared to CPLY is on account of higher input cost perpetuated mainly by imported coal prices, increase in stores and spares consumption, repairs & maintenance expenses, increase in purchased power rates, conversion charges, security expenses, higher usage of raw materials like Iron ore, Limestone and other ferro-alloys, higher interest charges and depreciation and loss on account of foreign exchange fluctuation, etc. The decline in the profitability was offset partially by increase in production volume, improved NSR, lower salaries & wages, better techno-economic parameters viz. improvement in BF productivity and Coke Rate, lower imported coal in blend, etc., decrease in Royalty expenses, higher stock valuation rate, higher dividend income, etc.
Data Collection: –
Historical data has been downloaded from 01/02/2023 to 31/01/2024 from www.nseindia.com, and the weekly returns of NIFTY 50 and SAIL are calculated from the same.
Y = a + b X
Here Y is the dependent variable (Weekly Returns of SAIL) and X is the independent variable (Weekly Returns of NIFTY 50)
SAIL Weekly Returns = – 0.001 + 1.36 (NIFTY 50 Weekly Returns)
The above equation shows the relationship between Weekly Returns of SAIL and NIFTY 50.
Data Analysis: –
- No. of Observations are 50.
- R2 means (0.24) 24% of SAIL Weekly Returns is explained by NIFTY 50 Weekly Returns. The rest 76% are errors which are not considered by the model.
- T stat for b & P value of it is 0.00, it is less than 0.05 which means that NIFTY 50 Weekly Returns are statistically significant at 5% level.
- F = 14.86 and P = 0.00 which is less than 0.05 that means the overall the model is statistically significant.
Conclusion: –
Beta (β) is 1.36, it is more than 1 which means that we should invest for short term.