A DETAILED STUDY ON THE RELATIONSHIP BETWEEN
NIFTY 50 AND POLYCAB INDIA LIMITED
Course: MBA – Finance
Subject: Research Methodology
Academic Year: 2024–25
1. Introduction
Polycab India Limited is one of India’s leading manufacturers of wires, cables, and fast-moving electrical goods (FMEG). The company plays a critical role in India’s infrastructure and housing growth story. From an investor’s perspective, it is essential to understand how Polycab’s stock behaves in relation to the overall market.
The NIFTY 50 index represents the performance of the top 50 companies listed on the National Stock Exchange (NSE). By analyzing the relationship between Polycab India Limited and the NIFTY 50 index, investors can assess the level of systematic risk associated with the stock. This study applies the Capital Asset Pricing Model (CAPM) to evaluate this relationship.
2. Need for the Study
The need for this study arises due to the increasing importance of risk analysis in equity investment decisions. While returns are important, understanding risk exposure is equally critical. Manufacturing and electrical goods companies like Polycab may be influenced by both macroeconomic factors and firm-specific variables such as demand cycles, raw material prices, and infrastructure spending.
This study helps investors determine whether Polycab behaves as an aggressive or defensive stock and whether it offers diversification benefits when included in a portfolio.
3. Objectives of the Study
The primary objectives of the study are:
• To analyze the relationship between Polycab India Limited and the NIFTY 50 index.
• To calculate the Beta of Polycab India Limited using CAPM.
• To test the statistical significance of market influence on Polycab’s returns.
• To evaluate the diversification potential of Polycab stock.
4. Scope of the Study
The scope of the study is confined to weekly stock returns of Polycab India Limited and the NIFTY 50 index. The analysis covers a period from December 2024 to November 2025. The study focuses only on systematic risk and does not include fundamental analysis or valuation metrics.
5. Literature Review
Sharpe (1964) introduced the Capital Asset Pricing Model (CAPM), which establishes a linear relationship between expected return and systematic risk. According to CAPM, investors are compensated only for systematic risk, as unsystematic risk can be eliminated through diversification.
Beta measures the sensitivity of a stock’s returns to market movements. R-squared explains how much of the variation in stock returns is explained by market returns, while Alpha measures abnormal returns earned over the benchmark.
6. Data Collection
The study is based on secondary data collected from the National Stock Exchange (NSE). Weekly closing prices were used to compute weekly returns.
• Dependent Variable (Y): Polycab India Limited returns
• Independent Variable (X): NIFTY 50 returns
• Number of Observations: 51
• Data Frequency: Weekly
7. Research Methodology
A quantitative research design was adopted for this study. Weekly returns were calculated using the percentage change method. Simple linear regression was applied using the CAPM equation:
Ri = α + βRm + ε
Where Ri represents the return of Polycab India Limited and Rm represents the return of the NIFTY 50 index.
8. Regression Results
The regression analysis produced the following results:
• Beta (β): 0.1790
• Alpha (α): -0.0764
• R-Squared (R²): 0.2073
• P-Value: 0.000789
9. Regression Equation
Polycab Returns = -0.0764 + 0.1790 (NIFTY 50 Returns)
10. Interpretation of Results
The beta value of 0.18 indicates that Polycab India Limited is a highly defensive stock. This means that the stock is far less sensitive to market fluctuations compared to the NIFTY 50.
The R-squared value of 0.21 suggests that only about 20.7% of the variation in Polycab’s returns is explained by market movements. This highlights the dominance of company-specific factors such as business expansion, infrastructure demand, and operational efficiency.
The p-value of 0.000789, which is less than 0.05, confirms that the relationship between Polycab returns and market returns is statistically significant.
11. Findings of the Study
• Polycab India Limited exhibits strong defensive characteristics.
• The stock has low exposure to systematic market risk.
• Company-specific factors play a major role in determining returns.
• Polycab provides effective diversification benefits.
12. Limitations of the Study
• The study is limited to one-year data.
• Only systematic risk is analyzed.
• Macroeconomic variables are not included.
• Results may change with different time horizons.
13. Conclusion
The study concludes that Polycab India Limited is a defensive stock with very low sensitivity to market movements. Its low beta value and limited market dependence make it suitable for conservative investors and diversified portfolios. The findings emphasize the importance of sector-specific analysis in equity investment decisions.
14. References
Sharpe, W. F. (1964). Capital Asset Prices: A Theory of Market Equilibrium under Conditions of Risk. Journal of Finance.
Bodie, Z., Kane, A., & Marcus, A. J. (2021). Investments. McGraw-Hill Education.
Damodaran, A. (2012). Investment Valuation. Wiley.