1. Introduction of the Company
The company, P N Gadgil & Sons Ltd. (PNG), is a leading jewellery retailer brand in India, with a significant presence in the state of Maharashtra, besides an ever-increasing footprint in the rest of the geographic divisions. The industry that the company is a part of remains extremely sensitive with regard to the macro-economic scenario, along with overall equity market fluctuations.
Because of the cyclic nature of discretionary spending patterns, as well as the impact of market-wide trends on stocks, it is quite relevant to analyze if the market performance of PNG is affected by market trends, which in this case is measured by the NIFTY 50 index.
2. Objective of the Study
The main aims of the research are:
• An exploration of the correlation between the returns of the PNG stock and the returns of the NIFTY 50 Index.
• To determine whether PNG is market sensitive or has systematic risk.
• Essential to appraise the relevance of market dynamics to the variability of PNG’s returns.
• To giving investors an insight into how PNG relies on overall market trends.
3. Literature Review
Previous empirical work in finance also implies that individual equity prices may be affected by broad market indices through systematic risk (Sharpe, 1964; Fama & French, 1992).
Studies related to the retail and consumer discretionary space have found that:
• These stocks are ordinarily positively correlated to the market indexes, but
• Firm-specific considerations, such as the strength of the corporate brands, geographic market power, as well as commodity price risks, could attenuate or accentuate this association.
Further research on the jewellery industry has revealed that the market-driven forces, along with pressures from the prices of gold and consumer behaviour influenced by festivals, tend to reduce the overall impact. Therefore, there isn’t any expectation that the shares of jewellery companies will perform like the benchmark indices.
The present study extends the literature by examining the PNG and NIFTY relation via regression analysis.
4. Data Collection
• Types of data: Secondary data
• Frequency of
• Time Period: According to the dataset
• Dependent Variable (Y): The PNG stock market’s weekly returns
• Independent Variable (X): The weekly returns of NIFTY 50 Index
• Source: Market price information compiled and organized using Excel
The results were calculated using week-by-week returns to filter out noise through daily closing prices.
5. Data Analysis
Simple linear regression analysis will be conducted, where the dependent variable will be the return on PNG, and the independent variable will be the return on NIFTY 50.
Key Analytical Observations:
• The regression coefficient (beta) shows the sensitivity of PNG to market trends.
• R² is indicative of the proportion of the variability in PNG’s return that is accounted for or explained by the NIFTY 50.
• The p-value is used to identify the statistical significance of the result.
Interpretation
• The data implies that the PNG stock market returns are explained only partially.
• A low-to-moderate value of R-squared suggests that, although market conditions exert some influence on the PNG, sector- and firm-specific factors play a major part in guiding the variations of returns.
• If beta is less than 1, the beta level specifies that the PNG stock is less volatile than the market. This could be expected in the context of a consumer stock.
• Statistical significance (if it exists) indicates that the market influence is indeed present, although it is not major.
This is consistent with theoretical expectations that stock prices of jewelry companies are market driven but not market driven in their totality.
6. Conclusion
The research concludes that:
• PNG stock shows some, but not very strong, responsiveness to the NIFTY 50.
• Market return data does not capture the source of return variation in PNG on its own.
•PNG can provide investors with the benefits of partial diversification, since the company does not move in lockstep with the larger market.
• With regards to risks, the company is seen as moderately risky from the systematic risk point of view, and as such, it is an appropriate stock for those seeking to invest in the retail jewelry industry.
In sum, the evidence supports the notion that industry-specific factors are as important as macro trends in the financial market in shaping stock prices.
7. References
• Sharpe, W. F. (1964). Capital Asset Prices: A Theory of Market Equilibrium. Journal of Finance.
• Fama, E. F., & French, K. R. (1992). The Cross-Section of Expected Stock Returns. Journal of Finance.
• Bodie, Z., Kane, A., & Marcus, A. J. (2018). Investments. McG
• NSE India – NIFTY 50 Index Methodology.
• SEC filings and other secondary market resources.