Relationship of Nifty 50 with NHPC Ltd.
Author: Nimesh Parte – 103
Introduction:
NHPC Limited, formerly known as National Hydroelectric Power Corporation, is a premier hydropower generation company in India. It was incorporated in 1975 with the objective of planning, promoting, and organizing an integrated and efficient development of hydroelectric power in India. NHPC is a Mini Ratna Category-I Public Sector Undertaking (PSU) and operates as a subsidiary of the Ministry of Power, Government of India.NHPC is primarily engaged in the construction and operation of hydroelectric power plants across various states in India. The company’s portfolio includes both conventional and pumped storage hydroelectric projects, with a total installed capacity of over 7,000 megawatts (MW). Some of NHPC’s notable projects include the 2,000 MW Subansiri Lower Hydroelectric Project in Arunachal Pradesh and the 2,000 MW Tehri Hydroelectric Complex in Uttarakhand. Overall, NHPC Limited plays a crucial role in India’s energy sector by harnessing the country’s abundant hydroelectric potential to meet the growing demand for clean and renewable energy.
Objective: To find out beta of NHPC Ltd and it’s significance.
Data Collection:
Data for Nifty 50 and NHPC Ltd has been downloaded from nseindia.com for the period 01/02/2023 to 31/01/2024. Weekly closing prices were found out. Weekly returns were calculated. Weekly returns of NHPC Ltd were regressed on weekly returns of Nifty 50.
Data Analysis:
Format of regression equation: Y =α + β(X)
Returns of the NHPC Ltd = -0.10835+ 1.234459returns of Nifty 50
(1.985156294)
N = 48, R Square = 0.006907, F = 0.319921 P value = 0.574404
Interpretation:
The above equation shows the relationship between the weekly returns of NHPC Ltd and the weekly returns of Nifty 50. Positive sign means direct relationship, meaning if price rises demand also rises and vice versa. If Nifty50 rises by 1 unit, NHPC Ltd will rise by 1.234 units and vice versa.
The value inside bracket is t-stat for b, the P-value for which is 0.574404 which is more than 0.05 meaning b is statistically not significant at 5% level.
Number of observations are 48. R square is 0.006907 meaning only 6% of NHPC Ltd is explained by weekly returns of Nifty 50. Balance 94% is the error due to other variables which are not in the model.
F is 0.319921, the P-value for which is 0.574404 which is more than 0.05 meaning overall the model is statistically not significant at 5% level.
Conclusion:
As β(1.234459) is more than 1, it is good to invest in NHPC Ltd for short term.