Title: Relationship of Asian Paints Ltd. with Nifty 50
Author: AYUSH RAJ
Introduction
Asian Paints Ltd. is India’s largest paint company, renowned for its extensive range of decorative and industrial paints. Established in 1942 and headquartered in Mumbai, Asian Paints operates in several countries and is a significant player in the global paint industry. The company focuses on innovation, quality, and sustainability, continually striving to meet the evolving needs of its customers. With a wide distribution network and a strong brand presence, Asian Paints has become synonymous with quality in the paint sector.
Objective
The primary objective of this study is to calculate the Beta of Asian Paints Ltd. and assess its significance in relation to Nifty 50.
Data Collection
Data for Nifty 50 and Asian Paints 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 Asian Paints Ltd. were then regressed against the weekly returns of Nifty 50.
Data Analysis
The regression equation derived from the analysis is:
Weekly Return of Asian Paints Ltd.=−0.25+(0.95×Weekly Return of Nifty 50)text{Weekly Return of Asian Paints Ltd.} = -0.25 + (0.95 times text{Weekly Return of Nifty 50})Weekly Return of Asian Paints Ltd.=−0.25+(0.95×Weekly Return of Nifty 50)
Where:
- N = 46 (number of observations)
- R² = 0.22
- t-statistic = 3.10
- F-statistic = 9.61
- P-value = 0.003
In this analysis, the coefficient of 0.95 indicates that for every 1% change in Nifty 50, Asian Paints Ltd. experiences a 0.95% change in the same direction. The R² value of 0.22 suggests that 22% of the variations in Asian Paints Ltd.’s returns can be explained by movements in Nifty 50, with the remaining 78% influenced by other factors.
Conclusion
The positive coefficient indicates a strong correlation between Asian Paints Ltd. and Nifty 50, suggesting that the stock price movements of Asian Paints are closely aligned with broader market trends. The statistically significant P-value (0.003) confirms that Nifty 50 has a meaningful impact on the stock’s performance. Therefore, Asian Paints Ltd. may represent a viable investment opportunity, particularly for long-term investors interested in the paints and coatings sector.