Author: Nandini Bhandarwar
Introduction:
Natco Pharma Limited is an Indian multinational pharmaceutical company headquartered in Hyderabad, established in 1981. It specializes in manufacturing finished dosage formulations, active pharmaceutical ingredients (APIs), and agrochemicals. The company is known for producing affordable specialty medicines, particularly in oncology, cardiology, and hepatology. Natco gained prominence for launching cost-effective versions of drugs like Nexavar (for cancer) and Tamiflu (for influenza). It has a strong presence in India, the U.S., Europe, and other global markets. The company focuses on complex generics and niche molecules, ensuring accessibility to critical medicines. In recent years, Natco has also expanded into the agrochemical sector.
Objective:
To find out the Beta of NATCO Pharma and it’s significance
Literature Review:
The Role of Pharmaceutical Industry in Economic Growth
Muratoglu (2017) examines the role of the pharmaceutical industry in economic growth, focusing on its export competitiveness and its impact on GDP and GDP per capita. The research utilizes the Revealed Comparative Advantage (RCA) Index to analyze pharmaceutical exports across 27 specialized countries from 2000 to 2014. Findings suggest a positive correlation between pharmaceutical exports and economic growth, highlighting the industry’s role in fostering innovation, creating employment, and increasing international competitiveness. The study also emphasizes the high R&D intensity in the pharmaceutical sector, which drives technological advancements and economic productivity. Advanced economies such as the USA, Japan, and European countries dominate global pharmaceutical trade, benefiting from strong patent protection and significant investments in research. Despite these advantages, the literature on the direct trade-related impact of the pharmaceutical industry on GDP remains limited. The study concludes that pharmaceutical industry specialization enhances economic performance, supporting policies that encourage investment in human capital and innovation
Market volatility in the Indian Pharmaceutical sector
.Lobo S. & Bhat, S. (2022) conducted a systematic literature review to examine the share price movements of the Indian pharmaceutical industry, considering both the pre-COVID-19 and COVID-19 periods. The study draws attention to the industry’s vulnerability to outside shocks, legislative modifications, and worldwide health emergencies, all of which affect stock price volatility. Through the integration of technical and fundamental analysis, the study pinpoints important variables that impact market fluctuations, including R&D expenditures, medicine approvals, patent expirations, and macroeconomic circumstances. Speculative trading and investor sentiment’s effects on pharmaceutical stock patterns are also covered in the study. The results highlight how defensive the industry is, frequently demonstrating resilience in times of economic crisis but undergoing severe volatility as a result of regulation announcements and disruptions in global supply chains. This comprehensive review offers insightful information on risk management tactics for legislators and investors navigating the pharmaceutical industry.
Data Collection:
NATCO Pharma and Nifty50 data was downloaded from NSE India website for period from 1-1-24 to 31-12-24 and data was manipulated to find out the Friday closing prices. Where weekly returns of NIFTY 50 will be Y & Weekly returns of NTPC will be X , Y regression on X
Data Analysis :
Equation: Natco Pharma = 0.939 + 1.197 Nifty50
Interpretation:
The regression equation describes the relationship between Nifty50 (X) and Natco Pharma share price (Y), indicating that Natco Pharma’s share price is the dependent variable, while Nifty50 is the independent variable. The positive coefficient of 1.197 suggests that for every unit increase in Nifty50, the Natco Pharma share price is expected to increase by 1.197 units. With 47 observations (N = 47), the (R^2) value is 0.13, implying that approximately 13% of the variation in Natco Pharma’s share price can be explained by changes in Nifty50. The F-value for the model is 7.04. The p-value for the slope is 0.01, which is less than the conventional threshold of 0.05. This indicates that the relationship between Nifty50 and Natco Pharma’s share price is statistically significant at the 5% level. Consequently, this model provides evidence to suggest a significant linear relationship between Nifty50 and Natco Pharma’s share price.
Conclusion:
Since the beta value is 1.197 it indicates that the company is good for short term investment.
References:
Lobo, S., & Bhat, S. (2022). A systematic literature review and research agenda of share price movement of the Indian Pharmaceutical Industry. International Journal of Management, Technology and Social Sciences (IJMTS), 7(2), 1-27.
Muratoğlu, G. (2017). Does pharmaceutical industry boost economic growth? A competitiveness-related approach. Yaşar Üniversitesi E-Dergisi, 12(48), 296-314.