Relationship of Nifty50 index with Reliance industries ltd
Author: Rishikesh Mistry
Introduction:
Reliance Industries Limited is an Indian multinational conglomerate headquartered in Mumbai. Its
businesses include energy, petrochemicals, natural gas, retail, telecommunications, mass media,
entertainment, and textiles. Reliance is the largest public company in India by market capitalization
and revenue and the 100th largest company worldwide. In 2023, the company was ranked 45th in
the Forbes Global 2000. It is India's largest private tax payer and largest exporter, accounting for
7% of India's total merchandise exports. The company has relatively little free cash flow and high
corporate debt.
Objective: To find Beta(β) of Reliance Industries Limited and its significance.
Data collection:
Nifty 50 data was collected from Nseindia.com and Reliance industries data was collected from
Yahoofinance.com for the period starting from 1 st March 2023 to 28 th February 2024.The historical data
collected was manipulated using Microsoft excel to get Friday closing prices for both, the index and
the company. Weekly returns were based on the closing prices which were calculated using excel tools
and with use of regression analysis , weekly returns of Reliance industries ltd were regressed on
weekly returns of nifty 50 index.
Data analysis:
Format of regression equation is Y= α + β(X)
Equation of regression of weekly returns of Reliance industries ltd on weekly returns of nifty50
index –
Weekly returns of Reliance industries ltd = 0.117967+ 1.104984 *weekly returns of nifty50 index
(5.415373)
Where,
Number of observations: 48,
R square = 0.389323,
F = 29.32626,
P-value = 0.688565
Interpretation:
The above equation shows relationship between weekly returns of Reliance industries ltd and
weekly returns of Nifty 50 Index.
Positive sign means direct relation, meaning if weekly returns of Nifty 50 Index rise then weekly
returns of Reliance industries ltd also rises and vice-versa.
If weekly returns of Nifty 50 Index rise by 1-unit, weekly returns of Reliance industries ltd
Company will rise by 1.104984 unit and vice-versa.
Figure in bracket shows t-stat for β, P-value for which is 0.688565, 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 0.389323 meaning approximately 38.93232%
of weekly returns of Reliance industries ltd are explained by weekly returns of Nifty 50 Index.
Balance 61.0677 (approximate) is error due to other variables which are not in the model.
F is 29.32626, the P-value of which is 0.688565, which is more than 0.05 meaning overall, the
model is not statistically significant at 5% significance level.
Conclusion:
As β (1.104) is greater than 1, it is good to invest in Reliance industries ltd for short term.