Title: Relation of Sonata Software Limited with Nifty50
Author: Sumit Meshram
Introduction:
Sonata Software Limited is an Indian IT consulting and services company, founded in 1986 and based in Bangalore. It provides digital and technology solutions to industries like retail, manufacturing, travel, and finance. Sonata is known for its expertise in cloud services, data analytics, software development, and digital transformation. It partners with big tech companies like Microsoft, AWS, and Google Cloud. Sonata uses a special method called Platformation to help businesses grow through digital platforms. With a global presence, it is trusted for delivering quality services, innovation, and customer satisfaction. Sonata also focuses on sustainability and social responsibility.
Objective:
To find out the Beta of Sonata Software Limited and it’s significance.
Literature Review:
Plugging into Global Value Chains of the Software Industry: The Experiences of India
Shaopeng, et al (2021) stated that the Indian software services industry has seen great success by becoming part of global value chains (GVCs), mostly providing low-cost, labor-intensive services to developed countries. This helped India grow economically and create jobs. However, the industry faces challenges like being too dependent on foreign markets and offering mostly low-end services. There is also a lack of strong domestic market connections and limited focus on high-value software products. To grow further and move up the value chain, Indian firms need to invest more in innovation, skills, and research. Strengthening their domestic market and focusing on advanced technologies will help India become more competitive globally.
Total Factor Productivity of the Software Industry in India
Bimal (2013) stated that the Indian software industry has grown impressively in recent decades. It has played an important role in the global software market by offering low-cost, labor-intensive services to developed countries. However, the industry faces challenges like being stuck in low-value tasks and lacking connections between software services and products, domestic and export markets, and IT manufacturing and software development. To improve and move to higher-value roles, Indian companies must focus on strengthening technical, commercial, and innovative skills. Additionally, developing the domestic market will help create strong linkages and further opportunities for growth.
Data Collection:
Sonata Software Limited and Nifty50 data was download for period 1-1-24 to 31-12-24 and data was manipulated to find out the Friday closing prices were calculated of Nifty50 = X and Sonata Software Limited = Y, Y was regression on X
Data Analysis:
Equation: Sonata Software = -0.0017 + (- 0.2268) Nifty50
Interpretation: The regression equation describes the relationship between Nifty50 (X) and Sonata Software’s share price (Y), indicating that Sonata Software’s share price is the dependent variable, while Nifty50 is the independent variable. The negative coefficient of -0.2268 suggests that for every unit increase in Nifty50, the Sonata Software share price is expected to decrease by 0.2268 units. With 47 observations (N=47), the model’s R-squared value is 0.0029, implying that approximately 3% of the variation in Sonata Software’s share price can be explained by changes in Nifty50, leaving 98% of the variation attributable to other factors not included in the model. The p-value for the slope is 0.7161, which is greater than the conventional threshold of 0.05, indicating that the relationship between Nifty50 and Sonata Software’s share price is not statistically significant at the 5% level.
Conclusion:
The beta value of Sonata Software is -0.2268, which shows that it moves opposite to the market but is not highly volatile. This makes it more suitable for long-term investment rather than short-term trading.
References:
Shaopeng Huang & Jai Asundi & Yuqing Xing, 2021. “Plugging into Global Value Chains of the Software Industry: The Experiences of India,” GRIPS Discussion Papers 21-04, National Graduate Institute for Policy Studies.
Bimal Kishore Sahoo, 2013. “Total Factor Productivity of the Software Industry in India,” IEG Working Papers 331, Institute of Economic Growth.