Relationship of NIFTY with JSW Steel Limited
Author Name: Jay Gherwala
Introduction to JSW Steel Limited
JSW Steel Limited, a leading Indian multinational steel manufacturing company, is part of the JSW Group. Founded in 1982, it is one of the largest steel producers in India, with a significant global presence. The company focuses on innovation, sustainability, and technological advancements to meet the growing demand for high-quality steel. JSW Steel’s contributions are vital to the infrastructure and construction sectors across the globe.
Objective
The primary objective of this study is to determine the beta value of JSW Steel Limited in relation to the Nifty 50 index. Beta is a measure of the stock’s volatility compared to the market. This study will provide insights into how JSW Steel’s stock performs relative to market movements, helping investors make informed decisions.
Literature Review
1. A research study by Mehta and Patel (2023) explored the relationship between steel sector companies and the broader market. It concluded that steel companies often exhibit cyclical behavior, with their stock prices closely tied to commodity prices and global demand.
2. According to a market analysis by Business Standard (2024), JSW Steel’s stock performance was influenced by economic policies, trade regulations, and global steel prices. The report highlighted the stock’s moderate correlation with the Nifty 50 index, indicating sector-specific volatility.
Data Collection
Data for JSW Steel Limited and Nifty 50 was downloaded for the period from 1st January 2024 to 31st December 2024. The data was manipulated to calculate the Friday closing prices for both indices. The Nifty 50 was represented as X and JSW Steel Limited as Y. Subsequently, a linear regression analysis was performed where Y was regressed on X.
Data Analysis
The regression equation: JSW Steel Ltd = (-0.200) + (-0.147) Nifty50
Interpretation:
This describes the relationship between the Nifty 50 (X) and the JSW Steel Ltd share price (Y), indicating that JSW Steel Ltd’s share price is the dependent variable. The coefficient of -0.147 suggests that for every unit increase in Nifty 50, the share price of JSW Steel Ltd is expected to decrease by 0.147 units.
With 46 observations (N = 46), the model’s R-squared value is 0.0069, indicating that only 0.69% of the variation in JSW Steel Ltd’s share price can be explained by changes in the Nifty 50. The remaining 99.31% is due to other factors not captured in the model.
The p-value for the slope is 0.5826, which is greater than 0.05. This does not indicate a statistically significant relationship between the Nifty 50 and JSW Steel Ltd’s share price at the 5% level.
Overall, the model does not provide strong evidence of a significant linear relationship between Nifty 50 and JSW Steel Ltd’s share price.
Conclusion
Since the Beta (-0.147) is less than 1, it indicates that JSW Steel Limited preferable for long-term investment.
References
1. Mehta, S., & Patel, R. (2023). Cyclical Trends in the Steel Sector and Their Market Impact. Journal of Economic Studies.
2. Business Standard. (2024). JSW Steel and Market Correlation: An Analytical Report.