Title: Relationship of Eicher Motors Limited with Nifty 50
Authors: Edison Antony (21330024172-MBA -F1)
Introduction: Eicher Motors Limited is an Indian multinational automotive company based in New Delhi. It is the parent company of Royal Enfield, which is recognized as the world’s oldest motorcycle brand in continuous production since 1901. In the last three years, Eicher Motors Limited’s market value grew from around ₹60,000 crore to about ₹90,000 crore. This shows a strong increase in its overall worth.
Objective: To find out the Beta of Eicher Motors Limited and its significance.
Data Collection: Data for Nifty 50 and Eicher Motors Limited was downloaded from https://www.nseindia.com/ for the period 1st April 2023 to 31st March 2024. Data was manipulated to get Friday closing prices and weekly returns were calculated using the formula (Yt+1 – Yt) / Yt * 100. Weekly returns of Eicher Motors Limited were regressed on weekly returns of Nifty 50.
Data Analysis:
Weekly Returns of EICHERMOT = 0.27 + 0.98 Weekly Returns of NIFTY50
N = 48, R² = 0.13, F = 6.97, P-value = 0.0113 (2.64)
The above equation shows the relationship between NIFTY50 and EICHERMOT. The positive sign before 0.98 means that if NIFTY50 rises, EICHERMOT also rises and vice versa. If NIFTY50 rises by one unit, EICHERMOT will rise by 0.98 units. The t Stat for β is 2.64, and the P-value for this is 0.0113, which is less than 0.05, indicating that β is statistically significant at the 5% level.
R² is 0.13, meaning 13% of EICHERMOT’s prices are explained by NIFTY50, while 87% depends on other factors like company-specific fundamentals or market conditions. The F is 6.97, and the P-value is 0.0113, meaning the overall model is statistically significant.
Conclusion: Since β is 0.98, which is less than 1 but more than 0, it indicates that EICHERMOT is a good option for long-term investment.