Title: Relationship of GAIL (India) Limited with Nifty50
Author: Gauresh Bhise
Introduction:
GAIL (India) Limited is the largest state-owned natural gas company in India, operating under the Ministry of Petroleum and Natural Gas. Established in 1984, it plays a vital role in natural gas transmission, distribution, and processing. The company manages an extensive network of pipelines, ensuring efficient gas supply across the country. GAIL is also involved in LNG imports, petrochemicals, city gas distribution, and renewable energy initiatives. Headquartered in New Delhi, it contributes significantly to India’s energy security and economic growth. With a focus on sustainability, GAIL is driving the transition towards a cleaner energy future. Its commitment to innovation and expansion strengthens its position as a key player in India’s energy sector.
Objective:
To find out the Beta of GAIL (India) Limited and it’s significance
Literature Review:
GAIL India’s Impact on NIFTY 50
GAIL (India) Limited plays a vital role in the NIFTY 50 index by contributing to India’s energy sector and maintaining a strong market presence. Despite facing a decline in profitability from 2011 to 2015, as highlighted in the study, the company demonstrated resilience through steady revenue growth and asset expansion. Its robust infrastructure in natural gas transmission and distribution ensures long-term stability, attracting investor confidence. However, increasing operational expenses and rising debt levels impacted net profit margins, necessitating strategic cost-cutting measures. The company’s efforts to optimize resources and enhance efficiency could strengthen its financial standing. With consistent government support and expansion initiatives, GAIL remains a key player in India’s energy market. Its inclusion in the NIFTY 50 reflects its significance in the country’s economic landscape. By focusing on profitability improvement and debt management, GAIL can further solidify its market position. Maintaining financial discipline and innovation will be essential for its future growth and sustained contribution to the index.
Impact of Dividend Announcements on GAIL’s Stock Price
The study in the document analyzes the impact of dividend announcements on the share price behavior of GAIL (India) Limited. It follows the semi-strong form of capital market efficiency, where new information influences stock prices. Using a Paired T-test, the research compares stock returns before and after the dividend announcement, showing that stock prices witness an immediate drop post-announcement and then stabilize at a lower level. The study finds that GAIL’s stock returns are not significantly correlated with the market index (S&P BSE SENSEX). The results suggest that dividend announcements have a noticeable effect on stock price behavior, aligning with market efficiency theories. By examining systematic and unsystematic risks, the study concludes that investors react to dividend information, affecting price fluctuations. The findings contribute to understanding market responses to corporate financial decisions in India.
Data Collection:
GAIL (India) Limited 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 GAIL (India) Limited will be X , Y regression on X
Data Analysis:
Equation: GAIL = 0.0022+1.15 Nifty50
Interpretation: The regression equation describes the relationship between Nifty50 (X) and Gail’s share price (Y), indicating that Gail’s share price is the dependent variable, while Nifty50 is the independent variable. With 56 observations ((N = 56)), the (R^2) value is 0.19, implying that approximately 19% of the variation in Gail’s share price can be explained by changes in Nifty50. The F-value for the model is 10.92, and the p-value for the slope is 0.001, which is significantly less than the conventional threshold of 0.05. This indicates that the relationship between Nifty50 and Gail’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 Gail’s share price.
Conclusion:
Since the beta value is 1.15 it indicates that the company is more volatile than the market and it is good for short term investment.
References:
Ahmad, P. F. & Ahmed, W. B. (2016). Profitability Analysis of a Public Sector Undertaking: An Analytical Study of GAIL (India) Limited. International Journal of Research in Finance and Marketing, 6(3), 13-21.
Kummeta, R. S. & Dara, R. M. (2016). Effect Of Dividend Announcement On Share Price Of GAIL. International Journal of Scientific Research in Computer Science Applications and Management Studies, ISSN, 2319-1953.