Author – Prashant Purohit
Introduction – PVR INOX Limited is India’s largest multiplex chain, formed through the merger of PVR Cinemas and INOX Leisure in 2022, operating over 1,700 screens across the country. The company dominates the organized cinema exhibition industry, serving as the primary distribution channel for theatrical releases in India’s growing entertainment market. With revenue streams from box office collections, food and beverage sales, and advertising, PVR INOX represents a significant player in the leisure and entertainment sector. This study analyzes PVR INOX’s stock performance against the Nifty 50 index to understand its market sensitivity and systematic risk profile.
Objective – Calculation Of Beta And Observe its significance.
Literature Review –
· Banz (1981) found that firm-specific characteristics beyond beta significantly influence stock returns, with smaller firms showing higher risk-adjusted returns than predicted by market sensitivity alone.
· Roll (1988) demonstrated that R-squared values in market model regressions vary substantially due to firm-specific information and trading characteristics, explaining why market factors account for different proportions of return variance across stocks.
Data Collection – Historical Data Of Pidilite Industries And Nifty50 was downloaded from NSE India.com Friday closing prices were found and weekly returns were calculated. Weekly returns of nifty50 was taken as x and weekly returns of PVR INOX LTD. taken as y. Y was regressed on x.
Data Analysis – This study uses OLS regression to examine the relationship between PVR INOX Limited’s weekly stock returns and Nifty 50 index weekly returns over 48 weeks. Weekly returns were calculated using Friday closing prices for both variables.
Regression Equation
The estimated regression equation is:
PVR INOX Weekly Returns = 1.0290 + 1.3482 × Nifty 50 Weekly Returns
The beta coefficient of 1.3482 shows PVR INOX has moderate market sensitivity. For every 1% change in Nifty 50, PVR INOX’s returns change by approximately 1.35% in the same direction. Since beta > 1, PVR INOX is a moderately aggressive stock. The intercept of 1.0290 represents expected weekly return when market return is zero.
T-Test Analysis
The t-statistic for beta is 4.301 with p-value of 0.0000877. Since p-value < 0.01, I strongly reject the null hypothesis (H₀: β = 0), confirming a highly significant positive relationship between PVR INOX’s and Nifty 50’s returns. The 95% confidence interval [0.717, 1.979] indicates the true beta lies within this range. The intercept’s p-value of 0.085 shows it is not statistically significant.
F-Statistic
The F-statistic is 18.498 with p-value of 0.0000877, confirming the overall regression model is highly statistically significant.
Model Fit
The R-squared value of 0.287 indicates 28.7% of PVR INOX’s return variation is explained by Nifty 50 movements. This moderate R-squared suggests 71.3% of variation comes from firm-specific factors like box office performance, OTT competition, and industry dynamics.
Price and Demand Implications
PVR INOX’s beta of 1.35 means during bull markets, the stock rises 1.35 times faster than the market. During bear markets, it falls moderately more than the market. This creates moderate cyclical demand, positioning PVR INOX as a moderately aggressive growth investment in the entertainment sector.
Conclusion -This regression analysis reveals PVR INOX Limited exhibits significant systematic risk (β = 1.35, p < 0.01), with 28.7% of return volatility explained by market movements and the remainder driven by entertainment industry-specific factors.
Reference –
· Banz, R. W. (1981). The relationship between return and market value of common stocks. Journal of Financial Economics, 9(1), 3–18. https://doi.org/10.1016/0304-405X(81)90018-0
· Roll, R. (1988). R². The Journal of Finance, 43(3), 541–566. https://doi.org/10.1111/j.1540-6261.1988.tb04591.x