Title: Relationship of V-Guard with Nifty 50
Author: Vanshika khillare
Introduction:
V-Guard Industries is an Indian electrical and electronic products manufacturer. The company operates in multiple segments, including voltage stabilizers, electric pumps, and kitchen appliances. This report analyzes the relationship between Nifty 50 and V-Guard stock performance.
Objective:
To find out the beta of V-Guard and its significance.
Literature Review:
Market efficiency and stock performance
Rakshit and Bardhan (2022) state that the efficiency of a company in managing its resources is an important indicator of its profitability. Macroeconomic factors, cost management, and stability affect market performance. A company’s stock price reacts to these factors, influencing investor decisions.
Impact of numerical data on investment decisions
Nautiyal and Kavidayal (2018) highlight that numerical data and statistical models help investors make better investment decisions. Understanding correlations between financial indicators allows investors to assess market trends and stock behavior.
Data Collection:
Nifty 50 and V-Guard data were downloaded from the NSE site for the period 01-01-2024 to 31-12-2024. The data was manipulated to extract Friday closing prices, from which weekly returns were calculated. Weekly returns of Nifty 50 are X, and weekly returns of V-Guard are Y. Y was regressed on X.
Data Analysis:
The regression equation is:
VGuard_Weekly_Returns = 0.6549 + 0.8372 × Nifty_Weekly_Returns
Number of observations (N) = 47, F = 5.698, R² = 0.112
Interpretation of the equation:
The above equation shows the relationship between Nifty 50 and V-Guard returns. V-Guard is the dependent variable, and Nifty 50 is the independent variable. A positive beta (0.8372) indicates a direct relationship, meaning if Nifty 50 rises, V-Guard also tends to rise. If Nifty 50 rises by 1%, V-Guard’s return is expected to rise by approximately 0.837%. The p-value (0.0213) is less than 0.05, meaning the relationship is statistically significant at a 5% level.
R² = 0.112, indicating that 11.2% of V-Guard’s returns are explained by Nifty 50, with the remaining 88.8% influenced by other factors. The F-statistic (5.698) and its p-value (0.0213) confirm that the model is statistically significant.
Conclusion:
The beta value of 0.8372 suggests that V-Guard moves in the same direction as the market but with lower volatility. Since the beta is less than 1, V-Guard is a moderately risky stock compared to Nifty 50. The statistical significance of the model confirms that Nifty 50 impacts V-Guard’s performance, but other factors also play a role.
References:
Bijoy Rakshit & Samaresh Bardhan, 2022. ‘Does Bank Efficiency Enhance Bank Performance? Empirical Evidence From Indian Banking,’ Bulletin of Monetary Economics and Banking, Bank Indonesia, vol. 25(Special I), pages 103-124, March.
Neeraj Nautiyal & P. C. Kavidayal, 2018. ‘Analysis of Institutional Factors Affecting Share Prices: The Case of National Stock Exchange,’ Global Business Review, International Management Institute, vol. 19(3), pages 707-721, June.