Title: Relationship of Apollo Tyres with Nifty 50
Author: Abhijith M P
Introduction: Apollo Tyres Ltd is a prominent Indian multinational tire manufacturer, established in 1972 and headquartered in Gurgaon, India. The company operates six manufacturing facilities globally, with four located in India and one each in the Netherlands and Hungary, producing a diverse range of tires for passenger vehicles, commercial trucks, and agricultural applications. Apollo Tyres markets its products under two key brands: Apollo and Vredestein, serving customers in over 100 countries and ranking among the top 20 tire manufacturers worldwide.
Objective: To find out Beta of Apollo Tyres and its significance.
Data Collection: The data was collected of Nifty 50 and Apollo tyres 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 NIFTY50 quoted as β (beta) = 1.0121
Weekly returns of Apollo Tyres = 0.0038
T stat = 2.6408
N = 49
R² = 0.1292
F = 6.9737
P value = 0.0112
Y = Weekly returns of Apollo Tyres + Weekly returns of NIFTY50
Y = 0.0038 + 1.0121x
Interpretation:
The above equation shows the relationship between NIFTY50 and Apollo Tyres. The positive sign before 1.0121 means that if NIFTY50 rises, Apollo Tyres also rises and vice versa. If NIFTY50 rises by one unit, Apollo Tyres will rise by 1.0121 units. The t Stat for β is 2.6408, and the P-value for this is 0.0112, which is less than 0.05, indicating that β is statistically significant at the 5% level.
R² is 0.1292, meaning 12.92% of Apollo Tyres prices are explained by NIFTY50, while 87.08% depends on other factors like company-specific fundamentals or market conditions. The F-statistic is 6.9737, and the P-value is 0.0112, meaning the overall model is statistically significant.
Conclusion: Since β is 1.0121, which is more than 1, it indicates that Apollo Tyres is a good option for short-term investment.