Author: Suraj Arekar
Introduction
Sky Gold Limited is a key player in the gold and jewelry industry in India. The company is involved in the manufacturing and trading of gold ornaments. Given the strong influence of global gold prices and market trends, it is important to analyze the relationship between Sky Gold’s stock performance and the Nifty50 index.
Objective
To determine the Beta of Sky Gold and its significance in relation to Nifty50.
Literature Review
Gold Industry and Stock Market Volatility According to Kumar & Sharma (2020), gold-related stocks often exhibit different volatility patterns compared to other sectors. Gold prices are influenced by macroeconomic factors such as inflation, interest rates, and global market conditions. This makes it crucial to analyze how gold stocks interact with broader market indices.
Market Indices and Commodity Stocks Patel & Mehta (2019) studied the impact of market indices on commodity-based stocks, finding that gold-related stocks generally have a lower correlation with broader indices due to their nature as safe-haven investments. However, during economic downturns, the correlation may increase due to investor sentiment.
Data Collection Stock price data for Sky Gold and Nifty50 was collected for the period 1st January 2024 to 31st December 2024. Weekly closing prices were extracted, and Sky Gold’s stock price (Y) was regressed on Nifty50 (X).
Data Analysis
Equation: Sky Gold Ltd = 0.003 + 4.15 Nifty50
Interpretation: The regression equation describes the relationship between Nifty50 (X) and Sky Gold Ltd’s share price (Y), indicating that Sky Gold Ltd’s share price is the dependent variable, while Nifty50 is the independent variable. The positive coefficient of 4.15 suggests that for every unit increase in Nifty50, Sky Gold Ltd’s share price is expected to increase by 4.15 units. With 47 observations (), the value is 0.19, implying that approximately 19% of the variation in Sky Gold Ltd’s share price can be explained by changes in Nifty50. The F-value for the model is 10.7, and the p-value is 0.001, which is less than the conventional threshold of 0.05. This indicates that the relationship between Nifty50 and Sky Gold Ltd’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 Sky Gold Ltd’s share price.
Conclusion Sky Gold’s beta value of 0.85 suggests that its stock moves slightly less than the market. The statistical significance indicates that market trends influence its price movements but to a lower extent compared to high-beta stocks. This makes it a suitable investment for those looking for a relatively stable asset in the jewelry industry while still being affected by market fluctuations.
References
1. Kumar, R., & Sharma, P. (2020). Gold Market Volatility and its Impact on Stock Performance, Journal of Financial Research, 42(3), 178-195.
2. Patel, M., & Mehta, S. (2019). Market Indices and Commodity-Based Stocks, Economic Review, 38(4), 220-235.