Author: Vaishnavi Changdev Raut
Introduction of the Company
Vardhman Textiles Ltd. is one of the largest textile manufacturers in India, engaged in the production of yarn, fabrics, sewing threads, and garments. The company caters to both domestic and international markets and is a major contributor to India’s textile export industry. Operating in a cyclical sector, Vardhman Textiles is influenced by economic conditions, raw material prices such as cotton, and global demand patterns.
Objective of the Study
To calculate Beta and observe its significance.
Literature Review
Sharma and Mehta (2018) found that textile sector stocks in India generally show cyclical behavior and moderate sensitivity to market movements.
Kapoor (2020) concluded that manufacturing companies are more affected by firm-specific and industry-related factors than by broad market fluctuations. These studies suggest that textile stocks may not always move closely with the market index.
Data Collection
Data Source: Stock Market Historical Data
Period of Study: Based on the selected dataset
Frequency: Weekly
Variables Used:
Independent Variable (X): Market Index returns
Dependent Variable (Y): Vardhman Textiles Ltd. stock returns
A linear regression model was applied by regressing Vardhman Textiles Ltd.’s weekly returns on market index weekly returns.
Data Analysis
Regression Equation:
Return of Vardhman Textiles Ltd.
= 0.53 − 0.39 × Return of Market Index
Statistical Results:
Number of Observations (N): 35
R Square: 0.010
Adjusted R Square: −0.019
Beta (β): −0.39
t-statistic (Beta): −0.59
P-value (Beta): 0.558
F-statistic: 0.35
Significance F: 0.558
Explanation
The beta value of −0.39 indicates that Vardhman Textiles Ltd. moves slightly in the opposite direction of the market, but the relationship is very weak. A 1% change in the market index results in an average 0.39% inverse change in Vardhman Textiles Ltd.’s returns.
The p-value of 0.558 indicates that the beta coefficient is statistically insignificant. Hence, market movements do not meaningfully explain the behavior of Vardhman Textiles Ltd.’s stock.
The R-square value of 0.010 suggests that only 1% of the variation in stock returns is explained by movements in the market index, while the remaining variation is due to company-specific and industry-related factors such as raw material prices, export demand, and operational efficiency.
Conclusion
The study concludes that Vardhman Textiles Ltd. has a very weak and statistically insignificant relationship with the market index. The company’s stock returns are largely driven by internal business conditions rather than broad market fluctuations. Therefore, Vardhman Textiles Ltd. is more suitable for investors who focus on company fundamentals and sector performance instead of overall market trends.
References
Sharma, R., & Mehta, P. (2018). Market Sensitivity of Textile Sector Stocks in India.
Kapoor, S. (2020). Risk Analysis of Manufacturing Sector Companies.
NSE India – Market Index Historical Data.
Annual Reports of Vardhman Textiles Ltd.