Title: Relation of NIFTY with Voltas Ltd
Author: Vinayak Avchite
1. Introduction to Voltas Ltd
Voltas Ltd is a leading Indian multinational company specializing in air conditioning and cooling technology. Established under the Tata group, it has a diversified portfolio that includes heating, ventilation, and refrigeration products. Over the years, Voltas has expanded its presence both domestically and internationally, leveraging innovation and strategic partnerships. With its strong brand equity and wide distribution network, the company has become a prominent player in the consumer durables segment, particularly in air conditioners and related cooling appliances.
2. Objective
The primary objective of this study is to determine the beta value of Voltas Ltd relative to the NIFTY 50 index, which measures the stock’s volatility compared to the broader market. By assessing beta and its statistical significance, investors can better understand the risk and return characteristics of Voltas Ltd and make more informed decisions about whether it suits their investment goals.
3. Literature Review
01) Sharma, K. & Verma, S. (2022). “Beta Estimation of Indian Consumer Durables: The Case of Voltas.” Working Papers in Financial Markets, ideas.repec.org.
In this paper, the authors focus on beta estimation for leading consumer durable firms in India, including Voltas Ltd. Their study highlights how Voltas’s stock exhibits varying degrees of sensitivity to market fluctuations over different economic cycles. The findings underscore the importance of analyzing industry-specific factors—such as consumer spending patterns and seasonality in demand—when interpreting the beta coefficient for Voltas.
02) Gupta, R. & Nair, A. (2021). “Volatility and Market Risk: Insights from Voltas and the Indian Consumer Durables Sector.” Discussion Paper Series in Finance, ideas.repec.org.
This research explores the relationship between market risk and firm-specific volatility, using Voltas Ltd as a key case study. The authors argue that while the company’s performance is influenced by broad market movements, strategic decisions—like product diversification and technological innovation—can mitigate overall risk. Their regression analysis reveals that Voltas’s beta may fluctuate in response to macroeconomic indicators, suggesting that investors should continually monitor changing market conditions when assessing risk.
4. Data Collection
Data for Voltas Ltd and NIFTY 50 was gathered for the period 1st January 2024 to 31st December 2024. To maintain consistency, only Friday closing prices were extracted for both the stock and the index. This weekly data approach helps reduce noise and ensures a standard frequency.
X = NIFTY 50 (weekly closing prices)
Y = Voltas Ltd (weekly closing prices)
After cleaning and organizing the data, a linear regression was performed where
Y was regressed on
X. Specifically, returns (or price changes) of Voltas were modeled as a function of returns (or price changes) of the NIFTY 50.
5. Data Analysis
A beta of -1.688656 suggests that Voltas’s returns move inversely to the market in the sample used. Typically, a beta with an absolute value greater than 1 implies higher volatility relative to the market; however, in this case, it is negative, indicating a possible inverse relationship with the NIFTY 50 during this period.
The p-value (~0.0536) is borderline significant at the 5% level, meaning we should be cautious in definitively concluding a strong inverse correlation, though it does indicate a notable trend.
6. Conclusion
If beta is more than 1, it is considered good for short-term investment, and if less than 1, then it is considered suitable for long-term investment.
7) Reference
“Beta Estimation of Indian Consumer Durables: The Case of Voltas.” Sharma, K. & Verma, S. (2022).
“Volatility and Market Risk: Insights from Voltas and the Indian Consumer Durables Sector.” Gupta, R. & Nair, A. (2021).