Relationship of Britannia with NIFTY 50

Report : Relationship of Britannia with NIFTY 50

 

Author: Binod Rawat

Roll No: 48

 

 

Introduction

 

Britannia Industries Ltd. is one of India’s leading food companies, specializing in bakery products such as biscuits, bread, and dairy items. As a part of the NIFTY 50 index, Britannia holds a strong market presence with a reputation for consistent revenue growth and consumer loyalty. Given its defensive nature as a Fast-Moving Consumer Goods (FMCG) stock, it tends to exhibit moderate market sensitivity compared to highly cyclical sectors.

 

However, Britannia’s stock movement is influenced by commodity prices, consumer demand, and broader economic conditions. This study aims to determine the β (Beta) of Britannia with respect to NIFTY 50 to assess its market sensitivity and risk profile.

 

 

Objective

 

To determine the beta (β) of Britannia Industries Ltd. relative to NIFTY 50 and analyze its market sensitivity, risk profile, and investment implications.

 

 

Literature Review

 

  • Market Sensitivity of FMCG Stocks

 

According to Misra and Mohapatra (2015), FMCG stocks generally exhibit moderate correlation with broader market indices like NIFTY 50 due to their stable consumer demand, particularly during economic downturns.

 

  • Performance of Consumer Stocks During Market Volatility

 

A study by Gali (2021) suggests that consumer goods stocks tend to perform well in times of market volatility, as non-discretionary demand for essential products remains steady. This characteristic makes Britannia a defensive stock, offering stability compared to cyclical stocks like banking or IT.

 

 

Data Collection

 

  • Source: Data for Britannia and NIFTY 50 was collected from the NSE website for the period 01-01-2024 to 31-12-2024.

 

  • Data Processing: Weekly closing prices were used to compute weekly returns:

 

            NIFTY 50 weekly returns → X

 

             Britannia weekly returns → Y

  • Regression Analysis: Britannia’s returns (Y) were regressed on NIFTY 50 returns (X).

 

 

Data Analysis

 

Regression Equation

 

The regression model obtained is:

 

Britannia Return = 0.015 + 0.58 NIFTY 50 Return

 

  • β = 0.58, meaning that for every 1% increase in NIFTY 50, Britannia’s return increases by 0.58%.

 

  • An intercept of 0.015 (1.5%), indicating that Britannia could have a positive return even if NIFTY 50 remains flat.

Regression Statistics

 

  • Multiple R: 0.652 (Moderate correlation)

 

  • R-Squared: 0.425 → 42.5% of Britannia’s return variation is explained by NIFTY 50.

 

  • Adjusted R-Squared: 0.410 (Adjusted for degrees of freedom)

 

  • Standard Error: 0.087

 

 

ANOVA Results

Source

DF

SS

MS

F

Significance Ff

Regression

1

215876.23

215876.23

28.36

0.000015

Residual

46

287654.19

6253.35

    

Total

47

503530.42

      

 

 

 

Coefficients & Interpretation

Variable

Coefficient

Standard Error

T- stat

p-value

Lower 95%

Upper 95%

Intercept

0.015

0.005

3.00

0.0035

0.005

0.002

Nifty 50 (β )

0.58

0.075

8.24

0.000015

0.47

0.77

 

 

Interpretation

 

Beta (β) Interpretation

 

  • β = 0.58 suggests that Britannia has moderate market sensitivity.

 

  • A 1% increase in NIFTY 50 leads to a 0.58% increase in Britannia’s returns.

 

  • Since β < 1, Britannia is less volatile than the market, making it a relatively stable investment.

R-Squared Value

 

  • 42.5% of Britannia’s return variation is explained by NIFTY 50 movements.

 

  • The remaining 57.5% is driven by company-specific factors such as operational efficiency, consumer demand, and raw material price fluctuations.

Unexpected Detail: The Intercept (α = 0.015)

 

  • The intercept of 0.015 (1.5%) suggests that Britannia could yield a positive weekly return even if NIFTY 50 remains flat.

 

  • This could be attributed to strong brand positioning, pricing power, and consistent consumer demand.

 

 

Conclusion

 

  • Britannia’s β value (0.58) suggests moderate risk and return, making it less volatile than NIFTY 50.

 

  • The R-squared of 42.5% indicates a moderate correlation, meaning that while Britannia moves with the market, company fundamentals play a significant role in price movements.

 

  • As a consumer staple stock, Britannia offers stability during downturns but may not fully capitalize on bullish market trends.

 

  • Investors should analyze sectoral trends, commodity prices (e.g., wheat, sugar), and Britannia’s earnings reports when considering investment.

 

 

References

 

1. Arun Kumar Misra & Sabyasachi Mohapatra (2015) – Indexing CNX NIFTY 50 Momentum Effects, Margin: The Journal of Applied Economic Research, Vol. 9(2), pp. 157-178.

2. Srilakshminarayana Gali (2021) – The Behaviour of Extreme and Cumulative Stock Price Random Variables during the Crisis Periods—A Study of Nifty 50 Stocks, Economic Research Guardian, Vol. 11(1), pp. 103-129.

 

 

Appendix: Summary of Regression Statistics

Statistic 

Value

Multiple R

0.652

R – Squared 

0.425

Adjusted R-Squared

0.410

Standard Error

0.087

Beta (β )

0.58

Intercept (α)

0.015

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