Title: Relation of Indices Nifty50 with Sudarshan Chemicals Industries Limited
Author: Sandip Vikram Brahmane
Introduction:
Sudarshan Chemicals Industries Limited is a leading player in the Indian chemical industry, specializing in pigments and performance chemicals. The company is an important part of the market, and its stock price movements in relation to broader indices like Nifty50 provide insight into its market behavior and risk characteristics.
Objective:
To determine the Beta of Sudarshan Chemicals with respect to Nifty 50 and assess its statistical significance.
Literature Review:
Downsizing and Efficiency in the Chemical Manufacturing Industry
Oleg Badunenko (2007) said that, the structural changes in the German chemical manufacturing industry during the 1990s, focusing on downsizing trends and their economic rationale. It identifies two major shifts: fluctuations in the number of firms and a substantial reduction in firm size. Using Data Envelopment Analysis (DEA), the study finds that firms in the sector exhibited high levels of technical inefficiency (25-30%) and were operating under decreasing returns to scale, making downsizing a necessary strategy for improving efficiency. The research shows that the share of scale-efficient firms increased over time, with smaller firms demonstrating better performance in terms of scale efficiency. This supports the argument that “small is beautiful,” as firms that downsized became more competitive. The study also highlights the role of globalization, changing market demands, and financial policy shifts in driving firms towards a leaner structure. While larger firms initially had better technical efficiency, the overall industry trend favored right-sizing operations to achieve optimal productivity. The findings suggest that rather than focusing solely on increasing firm size, companies should prioritize achieving the most productive scale size to maximize efficiency and competitiveness in the market.
Computer Integrated Manufacturing in the Chemical Industry: Theory & Practice
Ashayeri, J. et al (1995), said that the implementation of Computer Integrated Manufacturing (CIM) in the chemical industry, comparing it with discrete manufacturing. It highlights key differences between process and discrete industries, including automation, planning, and control. The study identifies necessary adaptations for CIM in the chemical sector, emphasizing process data acquisition, laboratory information management, lot tracing, and efficient utilization of processing facilities. Through a survey of six chemical companies in the Netherlands and Belgium, the paper finds that while automation is widespread, integration remains limited. The research underscores the need for greater awareness and strategic planning to fully leverage CIM’s potential in the chemical industry.
Data Collection:
The data for Sudarshan Chemicals and Nifty50 were collected for the period from 01-01-2024 to 31-12-2024. The dataset was manipulated to extract Friday closing prices, where Nifty50 was treated as the independent variable (X) and Sudarshan Chemicals as the dependent variable (Y). A regression analysis was conducted on this data.
Data Analysis:
Equation: Sudarshan Chemicals Industries Limited = 1.395 + 1.601 Nifty50
Interpretation:
The regression equation describes the relationship between Nifty50 (X) and Sudarshan Chemical’s share price (Y), indicating that Sudarshan Chemical’s share price is the dependent variable, while Nifty50 is the independent variable. The positive coefficient of 1.601 suggests that for every unit increase in Nifty50, Sudarshan Chemical’s share price is expected to increase by 1.601 units. With 47 observations, the model’s R-squared value is 0.198, implying that approximately 19.8% of the variation in Sudarshan Chemical’s share price can be explained by changes in Nifty50, while the remaining 80.2% is attributable to other factors not included in the model. The p-value for the slope is 0.0017, which is less than the conventional threshold of 0.05, indicating that the relationship between Nifty50 and Sudarshan Chemical’s share price is statistically significant at the 5% level. Consequently, this model provides strong evidence to suggest a significant linear relationship between Nifty50 and Sudarshan Chemical’s share price.
Conclusion:
Sudarshan Chemical’s beta of 1.60 indicates that it is more volatile than the market (Nifty 50) returns and hence it is better suited for short-term investment.
Reference:
Oleg Badunenko (2007): Downsizing in German Chemical Manufacturing Industry during the 1990s: Why Small Is Beautiful?
Ashayeri, J. & Teelen, A. & Selen, W.J. (1995): Computer integrated manufacturing in the chemical industry : Theory & practice.