Relationship of NIFTY 50 with Power grid corporation of India (PGCIL)
Author: Pratyush Prakhar Srivastav
Introduction
This research examines the relationship between the market index NIFTY 50 and the stock returns of Power grid corporation of India (PGCIL), focusing on the extent to which market movements influence the company’s equity performance. The study applies a regression-based approach to estimate the sensitivity of Power grid corporation of India (PGCIL) returns to changes in the NIFTY 50 index. By analysing weekly return data, the research aims to understand whether Power grid corporation of India (PGCIL) exhibits significant market dependence or whether its returns are driven largely by firm-specific factors. The findings help in assessing the stock’s systematic risk and its alignment with overall market movements.
Objective
The main objective of the study is:
Calculation of beta of Power grid corporation of India (PGCIL) and observe its significance
Literature Review
View 1: Profitability Analysis of Power Grid Corporation of India Ltd. (2016).
The study on the profitability of Power Grid Corporation of India Ltd. examines long-term financial performance using ratio and DuPont analysis over a twelve-year period. The research highlights how profitability ratios such as operating profit, net profit, and return on assets have performed both before and after the 2007–08 recession, indicating the firm’s ability to sustain earnings despite economic challenges. It also discusses cost structure and efficiency measures, showing that total expenses ratios decreased over time while core profitability remained relatively stable. The findings underscore the importance of financial management practices and profitability metrics in evaluating firm performance, while also suggesting that broader economic factors such as recessions can influence financial outcomes.
View 2: Equity Valuation of Public Sector Enterprises: Power Grid Corporation of India Ltd & ONGC Ltd. (2016).
The study on equity valuation of Power Grid Corporation of India and ONGC applies a discounted cash flow (DCF) approach to estimate the intrinsic value of the firms compared with their market prices. It involves forecasting free cash flows, estimating cost of capital, and deriving terminal values to evaluate long-term equity worth. The research emphasizes the forward-looking nature of DCF and how assumptions regarding growth, capital expenditure, and working capital affect valuation outcomes. By contrasting the computed intrinsic value with current market valuations, the paper sheds light on valuation techniques and their implications for investors assessing public sector enterprises.
Data Collection
The data of Nifty 50 and the data for Power grid corporation of India (PGCIL) was downloaded from 01-12-2024 to 30-11-2025 from NSE India.com. This data is used for finding out the Friday closing prices for Nifty 50 and Power grid corporation of India (PGCIL). 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 Power grid corporation of India (PGCIL) was taken as Y. Y was regressed on X.
Data Analysis
The estimated regression equation is:
PGCIL Returns=0.5610+0.9465(NIFTY Returns)
- The regression analysis is based on 49 weekly observations. The coefficient of the independent variable (β = 0.9465) is positive, indicating a positive relationship between market returns and the stock returns of Power Grid Corporation of India Limited. This implies that an increase in market returns is generally associated with an increase in PGCIL’s returns.
- The t-statistic for the beta coefficient is 4.7190 with a p-value of 0.000022, which is significant at both the 1% and 5% levels of significance. This confirms that the relationship between market returns and PGCIL’s stock returns is statistically significant.
- The R-square value of 0.3262 indicates that approximately 32.62% of the variation in PGCIL’s returns is explained by changes in the market index. The F-statistic of 22.27 with a significance value of 0.000022 shows that the overall regression model is statistically significant and has reasonable explanatory power.
Conclusion
The regression results indicate a positive and statistically significant relationship between the stock returns of Power Grid Corporation of India Limited and the market index. The estimated beta value (β = 0.9465) suggests that PGCIL’s returns move closely with market movements and exhibit market-level systematic risk. This indicates that the stock is moderately sensitive to overall market fluctuations.
With an R² value of 32.62%, a substantial portion of the variation in PGCIL’s returns is explained by market movements, although firm-specific factors also play an important role. Overall, Power Grid Corporation of India Limited can be considered a market-aligned stock, making it suitable for investors seeking exposure to systematic market risk along with stable company fundamentals.
References
– Kuldeep Chaudhary, Surbhi Gupta(2016). A study on the Profitability Analysis of Power Grid Corporation of India Ltd. International Conference on Industrial Engineering and Operations Management, Kuala Lumpur, Malaysia, March 8-10, 2016
– Anjala Kalsie, Ashima Arora (2016). Equity Valuation of Public Sector Enterprises: Power Grid Corporation of India Limited & ONGC Limited. International Journal of Commerce and Management ISSN: 0973-5976 (P); 2456-4575 (E) VOL-10, 2016.