Relationship of Nifty50 index with DLF India.
Author: Dharmesh pardeshi
Introduction:
DLF India is a leading real estate developer in India, with over 75 years of experience in the industry. Established in 1946, it has a reputation for high-quality architecture and innovative design. DLF is home to residential and commercial real estate across India, and is known as some of the most prestigious neighborhoods in Delhi. With its focus on customer-centric service, DLF is a leading company in the Indian real estate market.
Objective: To find Beta(β) of DLF India and its significance.
Data collection:
Nifty 50 data was collected from Nseindia.com and DLF India data was collected from Yahoofinance.com for the period starting from 1st February 2023 to 31st January 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 DLF India 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 DLF India ltd on weekly returns of nifty50 index –
Weekly returns of DLF India ltd = 1.2124 + 1.332688* weekly returns of nifty50 index
(3.506332)
Where,
Number of observations: 48,
R square = 0.210901,
F =12.29437,
P-value = 0.001026
Interpretation:
∙ The above equation shows relationship between weekly returns of DLF India Company 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 DLF India Company also rises and vice-versa.
∙ If weekly returns of Nifty 50 Index rise by 1-unit, weekly returns of DLF India Company will rise by 1.332688 unit and vice-versa.
∙ Figure in bracket shows t-stat for β, P-value for which is 0.001026, which is lesser than 0.05 meaning β is statistically significant at 5% significance level.
∙ Number of Observations are 48, R-square value is 0.210901 meaning approximately 21.09 of weekly returns of DLF India Company are explained by weekly returns of Nifty 50 Index. Balance 78.91 (approximate) is error due to other variables which are not in the model.
∙ F is 12.29437, the P-value of which is 0.001026, which is less than 0.05 meaning overall, the model is statistically significant at 5% significance level.
Conclusion:
As β (1.332688) is more than 1, it is good to invest in DLF India
Company for short term.