Relation analysis of Sun Pharmaceutical Industries Ltd. with Nifty 50.
Author: Saksham Goswami
F4 – 021330124027 ITM Business School Navi Mumbai
Introduction:
Sun Pharma is the largest pharmaceutical company in India, commanding over 8% of the domestic
market share. It is also recognized as the fourth largest specialty generic pharmaceutical company globally, with global revenues amounting to approximately $5.4 billion.
Objective:
To find out β (beta) of Sun Pharmaceutical Industries Ltd. And its significance with respect to Nifty 50.
Data Collection:
The data was collected of Nifty 50 and Sun Pharmaceutical Industries Ltd. From official site from official site of NSE for the period between 1/06/23 and 31/05/2024 which included historical market equity returns and the closing prices then the data was manipulated to get closing prices precisely on Fridays and then market returns were calculated by the formula (Y t-1 – Yt) / Yt * 100 and then Y was regressed on X.
Data Analysis:
Weekly returns of Nifty 50 quoted as β (beta) = 0.632267798
Weekly returns of Sun Pharmaceutical Industries Ltd. = 0.675841418
T stat = 2.303669
N = 45
R2 = 0.10985784
F = 5.306890659
P value = 0.0261389263
Y = Weekly returns of Sun Pharmaceutical Industries Ltd. + Weekly returns of Nifty 50
Y = 0.63 + 0.67x
Interpretation:
The above equation shows the relationship between weekly returns of Nifty 50 and weekly returns of Sun Pharmaceutical Industries Ltd. The positive sign before the coefficient of β means the positive relation between Nifty 50 and Sun Pharmaceutical Industries Ltd. I.e. if Nifty rises by 1 unit, then Sun Pharmaceutical will rise by 0.67.
Also, P value is 0.026 which is lower than 0.5 so T-stat is statistically significant at 5% level.
R2 is 0.10985784 which means 10.9% of weekly returns of Sun Pharmaceutical Industries Ltd. Are explained by Nifty.
Rest 89.1% is standard error i.e. affected by other factors such as PESTEL and operations of the company.
Conclusion:
If β is more than 1 it is good for short term investment.
If β is less than 1 but more than 0 as in the case of Sun Pharma and Nifty it is good for long term investment and it is advised to hold the security.
If β is less than 0 then the stock should be avoided.