Relationship of Nifty 50 Index with Finolex Industries Limited
Author: Fardeen Khan
Introduction:
Finolex Industries Limited is a leading Indian manufacturer of PVS pipes and fittings, catering to diverse sectors including agriculture, irrigation, infrastructure and housing. Established in 1981, the company has emerged as a trusted name synonymous with quality, reliability and innovation in the plastic industry. As a market leader Finolex has earned numerous certifications for its exemplary standards in product quality and safety. Embracing digital transformation, the company leverages technology to enhance operational efficiency, customer service and market reach, ensuring its position as a preferred choice in the PVC pipes and fittings industry.
Objective: To find Beta (β) of Finolex Industries Limited and its significance
Data Collection:
Nifty 50 Index and Finolex Industries 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 Finolex Industries Limited were regressed on weekly returns of Nifty 50 Index.
Data Analysis:
Equation of regression of weekly returns of Finolex Industries Limited on weekly returns of Nifty 50 Index-
Format of Regression equation is Y = α + β(X)
weekly returns of Finolex Industries Limited = -0.123825098 + 0.263072352 × weekly returns of Nifty 50 Index
(1.088433249)
Where,
Number of Observations = 48,
R Square = 0.025107445,
F = 1.184686937,
P-value = 0.282073732
Interpretation-
- The above equation shows relationship between weekly returns of Finolex Industries 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 Finolex Industries Limited Company falls and vice-versa.
- If weekly returns of Nifty 50 Index rise by 1-unit, weekly returns of Finolex Industries Limited Company will fall by 0.263072352 unit and vice-versa.
- Figure in bracket shows t-stat for β, P-value for which is 0.282073732, which is less than 0.05 meaning β is statistically significant at 5% significance level.
- Number of Observations are 48, R-square value is 025107445 meaning approximately 2.51% of weekly returns of Finolex Industries Limited are explained by weekly returns of Nifty 50 Index. Balance 97.49% (approximate) is error due to other variables which are not in the model.
- F is 184686937 , the P-value of which is 0.282073732, which is less than 0.05 meaning overall, the model is statistically significant at 5% significance level.
Conclusion:
As β (0.263072352) is less than 1, it is good to invest in Finolex Industries Limited for long term.