Author: Mubeen Khan
Introduction: Maruti Suzuki India, the market leader in India’s passenger vehicle segment, was incorporated in February 1981 as a joint venture between the Government of India and Suzuki Motor Corporation (SMC) of Japan. Currently, SMC holds a 56.28% equity stake in the company, while the overall promoter holding stands at 58.19%. The remaining 41.81% is held by the public, which includes 4.90% held by mutual funds and 18.98% by Foreign Institutional Investors (FII), as of June 30, 2024. Investors interested in buying shares of Maruti Suzuki India can do so by opening a Demat account, or alternatively, they can invest through exchange-traded funds (ETFs) or mutual funds that include Maruti Suzuki in their portfolios. This makes the company accessible to a wide range of investors, providing exposure to a key player in India’s thriving automotive industry.
Objective: To find out Beta of Maruti Equity and its significance.
Data Collection: Data of Maruti Equity and Nifty 50 was downloaded from 01/05/23 to 30/04/24 taken from NSE, then data is manipulated to get Friday closing prices.
Weekly return of Nifty 50 is taken as X and weekly return of Maruti Equity is taken as Y, then weekly returns of both were calculated, Weekly return of Maruti Equity was regressed on weekly returns of Nifty 50.
Data Analysis:
Weekly return of Maruti Equity = 0.53 + 0.50 weekly return of Nifty 50
(1.68)
N = 48, R square = 0.06, F = 2.82, P value = 0.09
Interpretation: The above equation depicts the relationship between weekly returns of Maruti Equity and weekly returns of Nifty 50.
The plus sign before the coefficient of Nifty 50 tells that if Nifty rises your competition will also rise & vice versa, If Nifty rises by one-unit Maruti Equity will rise by 0.90 unit, 1.68 is the T stat for beta and the p value for which 0.09 which is more than 0.05 meaning beta is statistically not significant at 5% level.
R square is 0.05 meaning 5% of company’s return are explained by Nifty 50 the balance 95% may be due to fundamentals.
F is 2.82 & P value is 0.09 meaning overall model is statistically insignificant.
Conclusion: As beta is 0.50 meaning the value is less than 1, hence invest for long term.