Title: Relationship between Nifty 50 and MRF Limited.
Author: Madhura Gaokar – 63
Introduction:
MRF Limited is one of India’s leading tyre manufacturing companies, known for its high-quality products and strong market presence. Founded in 1946, the company produces tyres for cars, trucks, motorcycles, and even aircraft. Over the years, MRF has built a reputation for durability, performance, and innovation.
Objective: To calculate Beta and observe its significance.
Literature Review:
1.Sant Kumar (2025) examines the relationship between stock returns and the NIFTY 50 using the CAPM model. The findings show that beta has a significant positive relationship with stock returns, confirming its importance in measuring market sensitivity. However, the model is not fully valid for all stocks, indicating deviations from index behavior. This suggests that individual stocks like MRF may not perfectly follow market movements. Thus, stock returns are influenced by both market and firm-specific factors.
2. Debajit Rabha and Rajkumar G. Singh (2022) analyze the relationship between stock returns and the NIFTY 50 using CAPM and rolling regression. The results confirm that beta is a crucial determinant of returns, showing a consistent relationship with market performance. However, variations across portfolios indicate that stocks do not move uniformly with the index. This implies that individual companies like MRF may exhibit different levels of correlation with NIFTY 50. Hence, both systematic and unsystematic factors affect stock performance.
Data Collection:
Data for Nifty 50 and MRF Limited was downloaded from nseindia.com for the period 1-1-25 to 31-12-25. The data was manipulated to get Friday Closing Prices of Nifty 50 and MRF Limited. Weekly Returns were calculated. Weekly Returns of Nifty 50 were named as X and Weekly Returns of MRF Limited were named as Y. Then Y was regressed on X.
Data Analysis:
Equation:
Y = a + bx
a = Intercept
b = Beta
a: -0.14731206
b: 1.08394705
The Regression Equation:
Y = -0.14731206 + 1.08394705x
Interpretation:
The regression equation obtained from the analysis shows the relationship between NIFTY 50 returns (X) and the company returns (Y) of MRF Limited. The coefficient of X (Beta) is 1.0839, which is positive. This indicates that there is a direct relationship between the NIFTY returns and the company returns. This means that when the market return increases, the company return also tends to increase, and vice versa.
The value of beta (1.0839) indicates that for every 1 unit increase in NIFTY return, the company return increases by approximately 1.0839 units. Since the beta value is greater than 1, it shows that the company is more volatile and riskier compared to the market, and its movements are larger than the overall market movements.
The intercept value is -0.1473, which represents the expected return of the company when the NIFTY return is zero.
The R² value is 0.3887, which means that approximately 38.87% of the variation in the company returns is explained by the variation in NIFTY returns, while the remaining 61.13% is influenced by other factors.
The p-value of the regression model is 2.20578E-06 = 0.0000022 which is less than 0.05. This indicates that the model is statistically significant, and the relationship between NIFTY returns and company returns is meaningful.
Conclusion:
The value of Beta is more than 1, so invest in MRF Limited Company for short term if Nifty rises.
References:
1. Kumar, S. (2025). The empirical performance of the CAPM on NSE Nifty 50: A study from April 2008 to June 2024 using the BJS methodology. MUDRA: Journal of Finance and Accounting, 12(1), 134–160.
2. Rabha, D., & Singh, R. G. (2022). Is CAPM still valid in today’s market scenario? Indian Journal of Finance, 16(5), 57–68