Title: Relationship of Radhika Jeweltech ltd. With Nifty 50.
Author: Rohit Sangle
Introduction: Radhika Jeweltech Ltd. is a prominent Indian jewelry manufacturer and retailer based in Rajkot, Gujarat, founded in 1987. The company specializes in producing and selling a wide range of gold, diamond, and platinum jewelry, including rings, earrings, necklaces, and bangles. With over 2 million satisfied customers, Radhika Jeweltech operates retail outlets and offers services such as jewelry repairs, resizing, and stone setting. It is publicly listed on the Bombay Stock Exchange (BSE), contributing to its strong presence in the Indian jewelry market. The company is committed to quality and customer satisfaction, with a rich legacy in the jewelry industry.
Objective:
To find out β (Beta) of the company and its significance.
Literature Review:
1. Momentum Effects in Indian Stock Market
Misra and Mohapatra (2015) studied the momentum effect within the CNX NIFTY 50 index, analyzing whether stocks that have performed well in the past continue to do so. Their findings indicated that momentum-based investment strategies can generate excess returns, suggesting inefficiencies in the Indian stock market. However, sector-specific stocks, such as those in the jewelry and retail industries, may not always follow the same momentum trends as broader indices, as their movements are often influenced by commodity prices (gold, silver), seasonal demand, and economic cycles.
2. Sectoral Sensitivity to Market Movements
Bansal and Jain (2018) examined the impact of broader market indices on specific sectors, including consumer discretionary stocks like jewelry and retail companies. They found that jewelry stocks exhibit low beta values compared to Nifty 50, meaning they are relatively insulated from market fluctuations. Instead, they are more responsive to gold prices, interest rates, and festival demand. This aligns with our findings for Radhika Jeweltech Limited, which has a low correlation with Nifty 50.
Data Collection:
The closing prices and weekly returns of Radhika Jeweltech Limited and Nifty 50 were collected for the period 01-01-2024 to 31-12-2024. Weekly returns of Nifty 50 were considered as the independent variable (X), and weekly returns of Radhika Jeweltech Limited were considered as the dependent variable (Y). A regression model was applied to analyse their relationship.
Data Analysis:
The regression analysis resulted in the following
Equation:
Radhika Jeweltech Weekly Return = 0.0215 + (-0.6934) × Nifty 50 Weekly Return
Interpretation:
The beta (β) value of -0.6934 indicates a negative correlation with the Nifty 50 index. If Nifty 50 increases by 1%, Radhika Jeweltech’s stock is expected to decrease by 0.69% on average. However, the R-squared value is very low (0.012), meaning that only 1.2% of the stock’s movement is explained by Nifty 50. The p-value (0.461) is above 0.05, suggesting that the relationship between Radhika Jeweltech Limited and Nifty 50 is not statistically significant.
Radhika Jeweltech Limited’s negative beta (-0.69) indicates a slight inverse correlation with the market, but the low R-squared value (0.012) suggests that its price movements are largely independent of Nifty 50. This implies that market fluctuations have minimal impact on the stock.
While the stock does not exhibit high volatility, its price is influenced more by gold prices, seasonal demand, and consumer trends rather than overall market conditions. Short-term traders may find opportunities in price swings during festive seasons, but long-term investors should assess the company’s fundamentals before making investment decisions.
Conclusion:
The beta (β) value of -0.69 suggests that Radhika Jeweltech moves opposite to the Nifty 50 index but with weak statistical significance. The low R-squared value indicates that factors other than the overall market have a greater influence on Radhika Jeweltech’s stock price. Investors should consider company-specific factors like demand for jewelry, gold prices, and industry trends rather than relying solely on market movements.
References:
Misra, A. K., & Mohapatra, S. (2015). ‘Indexing CNX NIFTY 50 Momentum Effects.’ Margin: The Journal of Applied Economic Research, 9(2), 157-178.
Bansal, R., & Jain, S. (2018). ‘Sectoral Sensitivity to Market Movements: Evidence from Indian Equity Markets.’ Economic & Political Weekly, 53(48), 127-140.