{"id":22638,"date":"2025-03-24T12:54:37","date_gmt":"2025-03-24T07:24:37","guid":{"rendered":"http:\/\/www.sachdevajk.in\/?p=22638"},"modified":"2025-03-24T12:54:37","modified_gmt":"2025-03-24T07:24:37","slug":"relationship-of-steel-authority-of-india-ltd-sail-with-nifty-50-index","status":"publish","type":"post","link":"http:\/\/www.sachdevajk.in\/?p=22638","title":{"rendered":"Relationship of steel authority of India Ltd. (SAIL) with nifty 50 Index"},"content":{"rendered":"

Title:<\/span><\/b> Relationship of steel authority of India Ltd. (SAIL) with nifty 50 Index.<\/p>\n

Author: Shashwat Sharma. Roll no (120)<\/p>\n

Introduction<\/span>: <\/b><\/p>\n

Steel Authority of India Limited (SAIL) is\u00a0India’s largest steel-making company, a Maharatna Central Public Sector Enterprise, and a government-owned steel producer, operating five integrated and three special steel plants, primarily in eastern and central India.<\/p>\n

SAIL has 54,431 employees and is under the administrative control of the\u00a0Ministry of Steel.<\/p>\n

Objective:<\/span><\/b> To find out beta of SAIL Ltd. and Nifty index.<\/p>\n

literature<\/span><\/b> review: <\/span><\/b><\/p>\n

1.\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 <\/span><\/span><\/span>Steel Authority of India Ltd. (SAIL) operates in the steel industry, which is highly sensitive to economic cycles, global commodity prices, and domestic demand. According to Bharadwaj (2006), stocks in cyclical industries, such as steel, are generally expected to have higher betas due to their greater sensitivity to changes in macroeconomic conditions. Steel companies, in particular, are also heavily influenced by global supply and demand dynamics, which can lead to higher stock volatility compared to the broader market.<\/p>\n

Jorion and Goetzmann (1999) further highlighted that sector-specific factors, such as international demand for steel and commodity prices (e.g., iron ore), influence the beta of companies in the metal sector. This means that the relationship between SAIL\u2019s stock and the Nifty 50 might not be perfectly aligned, as fluctuations in steel prices, production costs, and domestic regulations may result in stock price movements that diverge from those of the Nifty 50.<\/p>\n

2.\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 <\/span><\/span><\/span>Cyclicality and Sensitivity to Market Movements<\/p>\n

Several studies have examined the cyclicality of stock prices, particularly those in sectors such as steel, which have a high degree of exposure to economic cycles. According to Hegde and McDermott (2006), steel companies, including SAIL, typically have betas higher than the market due to their exposure to macroeconomic factors such as infrastructure development, construction, and industrial activity, which directly influence steel demand. In these cases, SAIL\u2019s stock may show heightened sensitivity to market fluctuations.<\/p>\n

3.\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 <\/span><\/span><\/span>In contrast, P\u00e1stor and Stambaugh (2003) argued that beta values are not static and can vary over time due to shifting macroeconomic conditions and market liquidity. This finding is particularly important when analyzing the relationship between SAIL and the Nifty Index, as changes in the global economic environment or local regulatory policies can alter SAIL\u2019s beta and its correlation with the broader market.<\/p>\n

Data collection:<\/span><\/b><\/p>\n

Steel authority of India Ltd. (SAIL) & Nifty 50 data was downloaded from Nse site for period 01-01-2024 to 31-12-2024 and data was manipulated to find out Friday closing price. weekly return was calculated weekly return of Nifty 50 is X and weekly return of steel authority of India Ltd. (SAIL) is Y.<\/p>\n

Y is Regressed on X.<\/p>\n

Data Analysis:<\/span><\/b><\/p>\n

SAIL\u00a0Return(Y)= \u22120.00024462 + 0.256531119 \u00d7 Nifty\u00a050\u00a0Return(X).<\/p>\n

No. of observations = 47\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 <\/span>T-stat = -0.02725<\/p>\n

R2<\/sup> =\u00a0 <\/span>0.0049\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 <\/span>\u00a0\u00a0<\/span>F = 0.22601<\/p>\n

Above equation is a linear regression equation that represents the relationship between the returns of Steel Authority of India Ltd. (SAIL) (dependent variable, Y) and the returns of the Nifty 50 Index (independent variable, X).<\/p>\n

The intercept of -0.00024462 means that when the Nifty 50 return is zero, the expected SAIL return is -0.00024462 or a very small negative value.This suggests that, in the absence of any movement in the Nifty 50 (i.e., when the market as a whole does not move), SAIL\u2019s stock would slightly decrease by approximately 0.0245%.<\/p>\n

The slope of 0.256531119 tells us how much SAIL\u2019s return is expected to change for every 1% change in the Nifty 50 return.For every 1% increase in the Nifty 50, SAIL\u2019s return is expected to increase by 0.2565%. Similarly, for a 1% decrease in the Nifty 50, SAIL’s return is expected to decrease by 0.2565%.<\/p>\n

The regression is based on 47 observations .<\/p>\n

The T-statistic for the intercept (and possibly the slope) is -0.02725.<\/p>\n

A T-statistic tests whether a coefficient is statistically different from zero. Typically, a T-statistic greater than 2 (or less than -2) indicates a statistically significant result.A value of -0.02725 is very small, indicating that the coefficient is not statistically different from zero at any reasonable significance level (such as 0.05). This implies that the intercept does not significantly differ from zero, meaning the relationship between SAIL\u2019s return and the Nifty 50 return is not statistically significant.<\/p>\n

(R\u00b2) is the proportion of the variance in the dependent variable (SAIL returns) that is explained by the independent variable (Nifty 50 returns). An R\u00b2 of 0.0049 means that only 0.49% of the variability in SAIL\u2019s returns can be explained by changes in the Nifty 50 index. This very low R\u00b2 value indicates that the Nifty 50 has almost no explanatory power over the fluctuations in SAIL\u2019s stock returns. Most of the movement in SAIL\u2019s stock is driven by other factors not captured by the Nifty 50 index.<\/p>\n

The F-statistic tests whether the overall regression model is statistically significant.The F-statistic of 0.22601 is very low, suggesting that the model does not explain much of the variation in SAIL’s returns. In other words, the relationship between SAIL’s returns and the Nifty 50 returns is not statistically significant.<\/p>\n

A low F-statistic (especially one below 1) suggests that the regression model as a whole is not a good fit for explaining SAIL’s stock returns based on the Nifty 50 index.<\/p>\n

Conclusion:<\/span><\/b><\/p>\n

In conclusion, we find beta is less than one which indicates that it is good for long term investment.<\/b><\/p>\n

\u00a0<\/p>\n

References:<\/span><\/b><\/p>\n

Heston, S. L., & Rouwenhorst, K. G. (1994). Does Industrial Structure Explain the Link Between Stock Returns and the Business Cycle?. Journal of Financial Economics, 36(1), 29-53.<\/p>\n

Jorion, P., & Goetzmann, W. N. (1999). Global Stock Markets in the Twentieth Century. Journal of Finance, 54(3), 953-980.<\/p>\n

Merton, R. C. (1973). An Intertemporal Capital Asset Pricing Model. Econometrica, 41(5), 867-887.<\/p>\n

P\u00e1stor, L., & Stambaugh, R. F. (2003). Liquidity Risk and Expected Stock Returns. Journal of Political Economy, 111(3), 642-685.<\/p>\n

Sharpe, W. F. (1964). Capital Asset Prices: A Theory of Market Equilibrium under Conditions of Risk. Journal of Finance, 19(3), 425-442.<\/p>\n

\u00a0<\/p>\n","protected":false},"excerpt":{"rendered":"

Title: Relationship of steel authority of India Ltd. (SAIL) with nifty 50 Index. Author: Shashwat Sharma. Roll no (120) Introduction: Steel Authority of India Limited (SAIL) is\u00a0India’s largest steel-making company, a Maharatna Central Public Sector Enterprise, and a government-owned steel producer, operating five integrated and three special steel plants, primarily in eastern and central India.… Continue reading Relationship of steel authority of India Ltd. (SAIL) with nifty 50 Index<\/span><\/a><\/p>\n","protected":false},"author":139829,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[],"class_list":["post-22638","post","type-post","status-publish","format-standard","hentry","category-uncategorized","entry"],"_links":{"self":[{"href":"http:\/\/www.sachdevajk.in\/index.php?rest_route=\/wp\/v2\/posts\/22638","targetHints":{"allow":["GET"]}}],"collection":[{"href":"http:\/\/www.sachdevajk.in\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"http:\/\/www.sachdevajk.in\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"http:\/\/www.sachdevajk.in\/index.php?rest_route=\/wp\/v2\/users\/139829"}],"replies":[{"embeddable":true,"href":"http:\/\/www.sachdevajk.in\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=22638"}],"version-history":[{"count":1,"href":"http:\/\/www.sachdevajk.in\/index.php?rest_route=\/wp\/v2\/posts\/22638\/revisions"}],"predecessor-version":[{"id":22639,"href":"http:\/\/www.sachdevajk.in\/index.php?rest_route=\/wp\/v2\/posts\/22638\/revisions\/22639"}],"wp:attachment":[{"href":"http:\/\/www.sachdevajk.in\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=22638"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"http:\/\/www.sachdevajk.in\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=22638"},{"taxonomy":"post_tag","embeddable":true,"href":"http:\/\/www.sachdevajk.in\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=22638"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}