Relationship of nifty with Steel Authority of India ltd
Author: Shubham mahesh loke.
Introduction:
Steel Authority of India ltd is a central public sector undertaking based in New Delhi, India. It is under the ownership of the ministry of steel, government of India with an annual turnover of ₹ 105,398 crore for the fiscal year 2022-23. Incorporated on 24 January 1973, SAIL has 57,139 employees (as of 1 December 2023). With an annual production of 18.29 million tons, it is the largest government owned steel producer. SAIL operates and owns 5 integrated steel plants at Bhilai, Rourkela, Durgapur, Bokaro and Burnpur and 3 special steel plants at Salem, Durgapur and Bhadravathi. It also owns a Ferro Alloy plant at Chandrapur.
Objective: To find Beta (β) of Steel Authority of India ltd and its significance
Data Collection:
Nifty 50 index and Steel Authority of India ltd 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 Steel Authority of India ltd were regressed on weekly returns of Nifty 50 index.
Data Analysis:
Equation of regression of weekly returns of Steel Authority of India ltd on weekly returns of nifty 50 index.
Format of regression equation: Y = α + β(X)
Weekly return of Steel Authority of India ltd = -0.41864 – 0.21719 * Weekly return of nifty50
Where,
No of observations = 48, R square = 0.005929,
F = 0.274379, P-value = 0.602924266.
Interpretation:
- The above equation shows relationship between weekly returns of Steel authority of India ltd 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 steel authority of India company falls and vice-versa.
- If weekly returns of Nifty 50 Index rise by 1-unit, weekly returns of Steel authority of India ltd will fall by 0.015 unit and vice-versa.
- Figure in bracket shows t-stat for β, P-value for which is 0.602924266, 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 005929 meaning approximately 0.05% of weekly returns of Steel authority of India ltd are explained by weekly returns of Nifty 50 Index. Balance 99.5% (approximate) is error due to other variables which are not in the model.
- F is 274379, the P-value of which is 0.602924266, which is more than 0.05 meaning overall, the model is not statistically significant at 5% significance level.
Conclusion:
As β (-0.01568) is less than 1, it is good to invest in Steel Authority of India ltd for long term.