Title: Relationship of Dr. Reddy’s Laboratories Ltd. with Nifty 50
Author: DEEPTI VISHWANATH GUPTA
Introduction
Dr. Reddy’s Laboratories Ltd. is a prominent Indian pharmaceutical company headquartered in Hyderabad. Founded in 1984 by Dr. K. Anji Reddy, the company specializes in developing, manufacturing, and marketing a wide range of pharmaceutical products, including generic medications and active pharmaceutical ingredients (APIs). Dr. Reddy’s is committed to innovation and quality, with a significant presence in both domestic and international markets.
Objective
The primary objective of this study is to calculate the Beta of Dr. Reddy’s Laboratories Ltd. and assess its significance in relation to Nifty 50.
Data Collection
Data for Nifty 50 and Dr. Reddy’s Laboratories Ltd. was obtained from the NSE website for the period from April 1, 2023, to March 31, 2024. The data was manipulated to extract Friday closing prices, and weekly returns were calculated using the formula:
Weekly Returns=(Yt−1−Yt)Yt×100text{Weekly Returns} = frac{(Y_{t-1} – Y_t)}{Y_t} times 100Weekly Returns=Yt(Yt−1−Yt)×100
The weekly returns of Dr. Reddy’s Laboratories Ltd. were then regressed against the weekly returns of Nifty 50.
Data Analysis
The regression equation derived from the analysis is:
Weekly Return of Dr. Reddy’s Laboratories Ltd.=−0.45+(1.10×Weekly Return of Nifty 50)text{Weekly Return of Dr. Reddy’s Laboratories Ltd.} = -0.45 + (1.10 times text{Weekly Return of Nifty 50})Weekly Return of Dr. Reddy’s Laboratories Ltd.=−0.45+(1.10×Weekly Return of Nifty 50)
Where:
- N = 46 (number of observations)
- R² = 0.32
- t-statistic = 4.50
- F-statistic = 20.25
- P-value = 0.0005
In this analysis, the coefficient of 1.10 indicates that for every 1% change in Nifty 50, Dr. Reddy’s Laboratories Ltd. experiences a 1.10% change in the same direction. The R² value of 0.32 suggests that 32% of the variations in Dr. Reddy’s Laboratories Ltd.’s returns can be explained by movements in Nifty 50, with the remaining 68% influenced by other factors.
Conclusion
The positive coefficient indicates a strong correlation between Dr. Reddy’s Laboratories Ltd. and Nifty 50, suggesting that the stock price movements of Dr. Reddy’s are closely aligned with broader market trends. The statistically significant P-value (0.0005) confirms that Nifty 50 has a meaningful impact on the stock’s performance. Therefore, Dr. Reddy’s Laboratories Ltd. may represent a viable investment opportunity, particularly for long-term investors interested in the pharmaceutical sector.