Relationship of Nifty 50 Index with Rallis India Limited
Author: Rishikesh Ashok Shinde
Introduction
Rallis India, a Tata Group company Group Co., has a history of over 150 years. The company is into manufacturing of Agrochemicals and is present across the value chain of agriculture inputs – from seeds to organic plant growth nutrients. Rallis is also in the business of contract manufacturing for global corporations.Managerial and operational support from TATA Chemicals Ltd (TCL) continues to benefit the company. TCL is engaged in manufacturing of soda ash, sodium bicarbonate, caustic soda and bromides. Rallis is strategically important for TCL as it is the only group company catering to agrochemical space. Further, it might be noted that TATA chemicals recently increased stake in Rallis India to 55.05% in July 2023 from 50.06% earlier further reiterating Rallis’ strategic importance to the group. In FY10, Rallis became a subsidiary of TCL; earlier, it was jointly owned by multiple Tata group companies.
Objective: To find Beta (β) of Rallis India Limited and its significance
Data Collection:
Nifty 50 Index and Rallis India 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 Rallis India Limited were regressed on weekly returns of Nifty 50 Index.
Data Analysis:
Equation of regression of weekly returns of Rallis India Limited on weekly returns of Nifty 50 Index-
Format of Regression equation is Y = α + β(X)
weekly returns of Rallis India Limited = -0.3148 + 0.2486 × weekly returns of Nifty 50 Index
(1.0667)
Where,
Number of Observations = 48,
R Square = 0.0241
F = 1.13780445
P-value = 0.29168329
Interpretation-
The above equation shows relationship between weekly returns of Rallis India 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 Rallis India Limited Company falls and vice-versa.
If weekly returns of Nifty 50 Index rise by 1-unit, weekly returns of Rallis India Limited Company will fall by 0.2486 unit and vice-versa.
Figure in bracket shows t-stat for β, P-value for which is 0.29168329, 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 0.0241 meaning approximately 2.41% of weekly returns of Rallis India Limited are explained by weekly returns of Nifty 50 Index. Balance 97.59% (approximate) is error due to other variables which are not in the model.
F is 1.13780445, the P-value of which is 0.29168329, which is more than 0.05 meaning overall, the model is not statistically significant at 5% significance level.
Conclusion:
As β (0.2486) is less than 1, it is good to invest in Rallis India Limited for long term.