Title : Relationship of Nifty50 with ONGC
Author: Om Hindalekar
Introduction:
This research explores the econometric evolution of ONGC’s risk premiums, highlighting that its expected returns are slightly lower than the NIFTY 50 due to strong market correlation. The study validates a CAPM framework by ensuring residuals are free of serial correlation and heteroscedasticity, while integrating intervention analysis to account for structural shifts. By incorporating exogenous variables like global oil prices and the Fama-French three-factor model, the analysis provides a refined outlook on ONGC’s performance, ultimately positioning it as a strategic investment choice relative to its market peers.
Objective:
Calculation of beta of ONGC and observe its significance
Literature Review:
View 1:Saniya Marwah(2022)Relationship between Firm’s Financial Performance and Share Prices:Evidence from Oil and Gas Sector India
The present study examined the relationship between share prices and financial performance of Reliance Industries and Oil and Natural Gas Corporation (ONGC) which are listed on the Bombay Stock Exchange (BSE). A descriptive research design was utilized during the study. Only secondary data, comprising a twelve-year period from 2010 to 2022, were utilized in the study. Correlation analysis was employed in the study to find the relationship between share price and financial performance measures i.e., EPS, RONW, Debt-Equity Ratio, ROCE and Net Profit ratio. The results of correlation between share prices and financial performance measures of the BSE listed firms are found to be either positive or negative but insignificant and significant. The study recommends that the management of firms should strive to improve the financial performance measures through the efficient management which leads to increase in maximization of the returns of the firms.
View 2: Daniel Casado Ginard(2024) Econometric analysis of the evolution of the emissions premium of Oil and Natural Gas Corporation Limited
This article aims to perform a statistical and econometric analysis of the evolution of Oil and Natural Gas Corporation Ltd (ONGC) premiums. It will be shown that ONGC’s expected return is slightly lower than the market return of the NIFTY 50, demonstrating how ONGC’s performance is significantly correlated with and influenced by the overall market. A financial and descriptive analysis will be conducted, and the CAPM model will be applied, analyzing the residuals (which will show no serial correlation or heteroscedasticity problems), followed by an intervention analysis. Structural changes and exogenous variables (global oil prices and competitors) will be studied along with the Fama-French three-factor model, leading to the final version of our CAPM model. The reader will be encouraged to consider investing in ONGC compared to other NIFTY 50 companies.
Data Collection:
The data of Nifty 50 and the data for ONGC was downloaded from 01-12-2024 to 30-11-2025 form NSE India.com. This data is used for finding out the Friday closing prices for Nifty 50 and ONGC. Weekly return was calculated by the formula (Yt+1-Yt)/Yt*100 and then weekly returns of the Nifty 50 was taken as X and the equity of ONGC was taken as Y. Y was regressed on X.
Data Analysis:
ONGC Returns = −0.0627+0.1286(NIFTY 50)
The above regression equation explains the relationship between the dependent variable (stock returns) and the independent variable (NIFTY 50 index values) using 49 weekly observations.
- The coefficient of X Variable 1 is positive (0.1287), indicating a positive but very weak relationship between the variable and the dependent outcome. This implies that a one-unit increase in X Variable 1 leads to an average increase of approximately 0.1287 units in the output, though the statistical evidence suggests this relationship is not reliable.
- The t-statistic for the coefficient is 0.41 with a p-value of 0.6836, which is far above the 1% and 5% levels of significance. This confirms that the coefficient is not statistically significant, indicating that movements in X Variable 1 do not have a meaningful or strong influence on the returns.
- The R-square value of 0.0036 shows that approximately 0.36% of the variation in the returns is explained by changes in X Variable 1, reflecting a negligible explanatory power of the regression model. The F-statistic of 0.168 with a significance value of 0.6836 indicates that the overall regression model is not statistically significant, confirming the absence of a strong linear relationship between the variables..
Conclusion:
- The regression analysis indicates a very weak and statistically insignificant relationship between the stock and the market index (X Variable 1). The estimated beta coefficient (β = 0.1287) is positive but not statistically significant (P-value = 0.6836), suggesting that we cannot confirm the stock’s returns move in the same direction as the overall market. The beta value reflects negligible market sensitivity, implying the stock’s movements are largely independent of systematic risk factors.
- With an R² value of 0.0036, a negligible proportion (0.36%) of the variation in the stock’s returns is explained by movements in the index, indicating almost no market dependence and that the returns are driven almost entirely by firm-specific factors or random noise. The insignificant F-statistic (Significance F = 0.6836) confirms the weakness of the regression model. Overall, the stock does not behave as a market-aligned security, meaning its performance is likely uncorrelated with the broader market.
References:
- Saniya Marwah.(2022). Relationship between Firm’s Financial Performance and Share Prices:Evidence from Oil and Gas Sector.Book: A Flourishing Digital Era: Innovations in Industry, Education,Management and Society.Volume- I – 2022
- Daniel Casado Ginard.(2024). Econometric analysis of the evolution of the emissions premium of Oil and Natural Gas Corporation Limited.Revista de Economia y Finanzas (REyF).Vol. 2 No. 4 (2024): Journal of Economics and Finance (January – April 2024)