Relation of Indices Nifty50 with Godrej Industries
Author: Ganesh Baykewar A div 03
Introduction
Godrej Industries Limited is a major player in the Indian market, with business operations spanning real estate, consumer goods, agriculture, and financial services. The company’s stock price movements relative to broader indices like Nifty50 provide insight into its market behavior and risk characteristics.
Objective
To determine the Beta of Godrej Industries with respect to Nifty50 and assess its statistical significance.
Literature Review
Downsizing and Efficiency in the Chemical Manufacturing Industry
Oleg Badunenko (2007) studied the structural changes in the German chemical manufacturing industry during the 1990s, focusing on downsizing trends and their economic rationale. The research identified two major shifts: fluctuations in the number of firms and a substantial reduction in firm size. Using Data Envelopment Analysis (DEA), the study found that firms exhibited high levels of technical inefficiency (25-30%) and were operating under decreasing returns to scale. Downsizing improved efficiency, making smaller firms more competitive. The study highlights the importance of achieving the most productive scale size rather than focusing solely on increasing firm size.
Computer Integrated Manufacturing in the Chemical Industry: Theory & Practice
Ashayeri, J. et al. (1995) examined the implementation of Computer Integrated Manufacturing (CIM) in the chemical industry and compared it with discrete manufacturing. The study identified differences in automation, planning, and control. A survey of six chemical companies in the Netherlands and Belgium revealed that while automation was widespread, integration was limited. The research emphasized the need for strategic planning and greater awareness to maximize the potential of CIM in the chemical industry.
Data Collection
The data for Godrej Industries and Nifty50 was 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 Godrej Industries as the dependent variable (Y). A regression analysis was conducted on this data.
Data Analysis
Equation:
Godrej Industries = -0.3459 + 0.9533 × Nifty50
Interpretation:
The regression equation describes the relationship between Nifty50 (X) and Godrej Industries’ share price (Y), indicating that Godrej Industries’ share price is the dependent variable, while Nifty50 is the independent variable. The positive coefficient of 0.9533 suggests that for every unit increase in Nifty50, Godrej Industries’ share price is expected to increase by 0.9533 units.
• R-squared value: 0.121 → Approximately 12.1% of the variation in Godrej Industries’ share price can be explained by changes in Nifty50.
• P-value for the slope: 0.0164 → Less than the conventional threshold of 0.05, indicating that the relationship between Nifty50 and Godrej Industries’ share price is statistically significant at the 5% level.
• T-statistic: 2.493 → Indicates a meaningful relationship between Nifty50 and Godrej Industries.
• F-statistic: 6.214 (P-value = 0.0164) → Confirms that the overall model is statistically significant.
Conclusion
Godrej Industries’ beta of 0.9533 indicates that it is moderately volatile and tends to move in the same direction as Nifty50. The statistically significant T-statistic, P-value, and F-statistic confirm that the relationship between Godrej Industries and Nifty50 is real and meaningful — not due to random variation. Therefore, Godrej Industries can be considered a moderate-risk investment suitable for long-term investors seeking stable returns.
References
• 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.