Relationship of Nifty 50 Index with Alkem Laboratories Limited
Author: Anuj Bhore
Introduction:
Alkem Laboratories is an emerging company based in Edinburgh, Scotland that focuses on developing energy storage solutions for grid-scale applications. The company has developed a unique technology that utilizes capacitive energy storage to provide power when traditional energy sources are not available. The technology is designed to be cost-effective and environmentally friendly, making it an attractive solution for renewable energy applications. Alkem Laboratories has received funding from several investors and has partnered with several major players in the energy industry.
Objective: To find Beta (β) of Alkem Laboratories Limited and its significance
Data Collection:
Nifty 50 Index and Alkem Laboratories Limited data was collected from nseindia.com website for the period of one year dating from 1st February 2023 to 31st January 2024. The historical data collected was manipulated using Microsoft Excel to get Friday closing prices of both, the index and the company. Weekly returns were based on the closing prices were calculated using Excel tools and with use of Regression analysis, weekly returns of Alkem Laboratories Limited were regressed on weekly returns of Nifty 50 Index.
Data Analysis:
Equation of regression of weekly returns of Alkem Laboratories Limited on weekly returns of Nifty 50 Index-
Format of Regression equation is Y = α + β(X)
weekly returns of Alkem Laboratories Limited = – 0.8710 – 0.1921 × weekly returns of Nifty 50 Index
(-0.5416 )
Where,
Number of Observations = 48,
R Square = 0.0063,
F = 0.293293,
P-value = 0.590732
Interpretation-
- The above equation shows relationship between weekly returns of Alkem Laboratories Limited Company and weekly returns of Nifty 50 Index.
- Negative sign means inverse relation, meaning if weekly returns of Nifty 50 Index rise then weekly returns of Alkem Laboratories Limited Company falls and vice-versa.
- If weekly returns of Nifty 50 Index rise by 1-unit, weekly returns of Alkem Laboratories Limited Company will fall by 0.1921 unit and vice-versa.
- Figure in bracket shows t-stat for β, P-value for which is 0.590732 , which is greater than 0.05 meaning β is not statistically significant at 5% significance level.
- Number of Observations are 48, R-square value is 0063 meaning approximately 0.63 % of weekly returns of Alkem Laboratories Limited are explained by weekly returns of Nifty 50 Index. Balance 99.37 % (approximate) is error due to other variables which are not in the model.
- F is 293293 , the P-value of which is 0.590732, which is greater than 0.05 meaning overall, the model is not statistically significant at 5% significance level.
Conclusion:
As β (-0.1921) is less than 1, The fundamentals of the company are weak, Hence it is advised not to invest in Alkem Laboratories .