1. Introduction of the Company
Dr Reddy’s Laboratories Ltd. is one of India’s leading multinational pharmaceutical companies, established in 1984. The company operates across active pharmaceutical ingredients (APIs), generic formulations, biosimilars, and proprietary products. It has a strong presence in domestic as well as international markets, including the United States, Europe, and emerging economies.
Being a large-cap pharmaceutical stock, Dr Reddy’s share price is influenced not only by overall market movements but also by industry-specific factors such as regulatory approvals, drug pipelines, patent expiries, and global healthcare demand. This study evaluates how the returns of Dr Reddy’s Laboratories relate to movements in the broader market index, NIFTY 50.
2. Objective
The primary objective of this study is to analyze the relationship between Dr Reddy’s Laboratories’ returns and the NIFTY 50 index using historical data.
Specific objectives include:
- To calculate the Beta coefficient of Dr Reddy’s Laboratories.
- To assess the systematic risk of the stock in relation to the market.
- To determine whether the stock behaves as an aggressive or defensive investment.
- To examine how much of the stock’s return is explained by market movements.
3. Literature Review
This study is based on the Capital Asset Pricing Model (CAPM), which explains the relationship between expected return and market risk.
Systematic Risk (Beta)
Beta measures the sensitivity of a stock’s returns to changes in the overall market:
- Beta = 1 → Moves in line with the market
- Beta > 1 → More volatile than the market (Aggressive stock)
- Beta < 1 → Less volatile than the market (Defensive stock)
Unsystematic Risk
Unsystematic risk arises from firm-specific factors such as:
- Business strategy
- Industry conditions
- Management decisions
This risk is unique to the company and is not explained by market movements.
Regression Model
The CAPM regression equation used in this study is:
Ri=α+βRm+ϵ
Where:
· Ri = Return of Dr Reddy’s Laboratories.
· Rm = Return of NIFTY 50.
· α = Alpha (excess return).
· ϵ = Error term
4. Data Collection
The data used in this study was taken directly from the Excel file (Merged Data.xlsx).
Data Details
- Stock: Dr Reddy’s Laboratories Ltd.
- Market Index: NIFTY 50
- Period Covered: December 2024 to November 2025
- Frequency: Weekly data
- Number of Observations: 49 weeks
Variables Used
- Independent Variable (X): Weekly returns of NIFTY 50
- Dependent Variable (Y): Weekly returns of Dr Reddy’s Laboratories
The weekly returns for both the stock and the index were already computed in the dataset and used directly for regression analysis.
5. Data Analysis
A linear regression analysis was performed using weekly returns of Dr Reddy’s Laboratories against weekly returns of NIFTY 50.
Regression Results (from Excel-based analysis)
- Beta: –0.18
- Alpha: –0.07
- R-Squared: 0.01
Interpretation
- Beta (–0.18):
The negative beta indicates a weak inverse relationship between Dr Reddy’s stock returns and NIFTY 50 returns. For every 1% change in the NIFTY 50, Dr Reddy’s returns move by approximately –0.18%. This suggests that the stock has low market sensitivity. - Alpha (–0.07):
The negative alpha implies that the stock generated slightly negative excess returns when the market return was zero during the study period. - R-Squared (1%):
Only 1% of the variation in Dr Reddy’s returns is explained by movements in the NIFTY 50, indicating that most of the price movement is driven by company-specific and industry-specific factors.
Regression Equation
DR Reddy’s Return=−0.07−0.18(NIFTY 50 Return)
6. Conclusion
The study concludes that Dr Reddy’s Laboratories exhibits very low and negative systematic risk during the period from December 2024 to November 2025. The stock does not move closely with the broader market and shows defensive characteristics.
Key Findings
- Dr Reddy’s Laboratories is weakly correlated with NIFTY 50.
- Market movements have minimal influence on the stock’s weekly returns.
- Stock performance is largely affected by firm-specific and pharmaceutical sector factors.
Investor Implications
- The stock may offer diversification benefits in a portfolio.
- It may be suitable for investors seeking lower market exposure.
- Investment decisions should focus on fundamentals, earnings growth, and industry trends, rather than overall market movements alone.
7. References
- Excel Dataset: Merged Data.xlsx (Provided by the researcher)
- NSE India – NIFTY 50 Historical Data
- Investopedia – Capital Asset Pricing Model (CAPM) and Beta
- Sharpe, W. F. (1964). Capital Asset Prices: A Theory of Market Equilibrium under Conditions of Risk. The Journal of Finance