Relationship of nifty with Sobha Ltd.

Relationship of nifty with Sobha Ltd.​

 

Author: Sumit Motwani

Introduction

Sobha Limited operates as a real estate development and construction company in India. The company engages in the construction, development, sale, management, and operation of townships, housing projects, commercial premises, and other related activities. Sobha also manufactures interiors, glazing and metal works, and concrete products. In addition, the company provides products for home needs, spring mattresses, and modular office furniture. Sobha Limited, formerly known Sobha Developers Ltd., was founded in 1995 and has its headquarters based in Bangalore.

Objectives

To find out β of company and its significance

Data Collection

Data for Nifty50 and Sobha Ltd has been downloaded from Yahoofinance.com for the period 1-2-23 to 31-2-24 weekly closing prices were found, weekly returns were calculated, weekly returns of Sobha Ltd where regressed on weekly return of Nifty50.

Data Analysis

Format of regression equation is Y = α + β(X)

Equation of regression of weekly returns of Sobha Ltd on weekly returns of Nifty50 index.

Weekly returns of Sobha Ltd Y = 806.6799 + 7.7856 weekly returns of Nifty50 index.

​​​​​(0.0299)

Where,

Number of Observation: 47

R square: 0.029995511

F = 0.244344484

P-value: 0.244344484

t-stat: 1.179634635

Interpretation

• The above equation shows relationship between weekly returns of Sobha Ltd company and weekly of Nifty50 Index.
• Positive sign means direct relation, meaning if weekly returns of Nifty50 Index rise then weekly retruns of Sobhs Ltd also rises and vice-versa.
• If weekly returns of Nifty50 index rise by 1 unit, weekly returns of Sobha ltd will rise by 7.78568 unit and vice-versa.
• Figure in bracket shows t-stat for β, P-value for which is 0.24434, which is greater than 0.05 meaning β is not significant at 5% significance level.
• Number of observation are 47, R square value is 0.02999 meaning approximately 30% of weekly returns of SobhaLtd are explained by weekly returns of Nifty50 index. Balance -75.5656 (approximately) is error due to other variables which are not in the model.
• F is 0.24434, the p-value of which is 0.24434, which is more than 0.05 meaning overall, the model is not statistically significant at 5% significance level.

Conclusion

If β (7.7856) is more than one it is good to invest for short-term.

 

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