Events, News, Stocks, Sectors and Market

Events, News, Stocks, Sectors and Market

Events, News,
Stocks, Sectors and Market

KIRAN
KUMAR K V

Sensex touching 30000 was the most anticipated long
due sentimental aspiration of every market participant in India. This April 5th,
the 30-scrip index did touch the emotional benchmark. What is even more joyful
for investors is the kind of returns the markets have generated in the last few
months. Overall, various equity portfolios (read equity mutual funds) have
returned a 12-14% return in the past one year. For the last three-four quarters
markets have been remaining in the positive terrain. In March-2017 alone
benchmark indices like Sensex and Nifty have rose around 3%. The said rally,
mostly termed as bullish phase can be dedicated to certain events like
passing of four GST bills in the latest past, release of stronger growth
numbers despite demonetization, rupee strengthening and positive flow of FII
money.

Every bull phase in the market will be led by certain sectors. Logically,
events drive the market.

Events will also be related to few sectors and stocks
of those sectors will see heavy buying. For instance consider the case of
Cosco. Cosco (India) Limited is a company primarily into manufacturing
of sports goods. Post the Summer Olympics of 2016 (held during August of 2016),
the stock price has only been going up from a level of Rs. 140 to Rs. 260
(refer appended graph), mostly led by the bronze medal winning of Badminton
player P V Sindhu, which was expected to increase the interest levels in the
very sport – Ball Badminton. Cosco one of the few branded and listed
manufacturer of sports goods, already present in the manufacturing of Badminton
related goods, was one of the few companies that attracted buyers.

 

Similarly, GST bill passing in Jan-Mar 2017 quarter, attracted heavy buying
in sectors like consumer durables, capital goods, FMCG and realty companies.
Stronger rupee has affected the metal and IT sector during the same period.
(Refer the table appended).  Events
affect Sectors; Sector impact overall Market. Mathematically, overall market
movement in the short term is a function of events. Thus, as an investor, it
becomes useful to understand the relation of each sector in the market with
the market
. Because, what investors access is news. Using obvious
senses to determine which sectors get affected due to the events, one can
attempt to predict the overall markets. This article, tries to summarise the relation
between different sectors and the market.
Data Analysis
Last one year’s daily index price data is collected
for Nifty and 17 sectoral indices – Nifty Auto, Nifty Banking, Nifty Energy,
Nifty Financial Services, Nifty FMCG, Nifty IT, Nifty Media, Nifty Metal, Nifty
Pharma, Nifty Private Bank, Nifty PSU Bank, Nifty Realty, Nifty Commodities,
Nifty Infrastructure, Nifty Tata Group, Nifty Mahindra and Nifty Aditya Birla
Group. A study of correlation of the same is conducted using MS-Excel Data
Analysis Toolpak. A graphical correlation matrix (using data bars of
conditional formatting) is created.
ü 
Correlation between IT sector and the market (as
represented by Nifty) and also IT sector with most other sectors is also
negative. The same can be due to the negative impact of political changes at
the global level, including Donald Trump winning the US presidential elections
and also the strengthening of rupee.
ü 
Surprisingly, Pharma is found to be least
correlated with Nifty.
ü 

Also tested are the relation of large corporate groups like Tatas, Birlas
and Mahindras, and it is found that Tata and Birla Groups have major
association with the overall market, whereas Mahindra group is not much
correlated.

For
further validation, below alternative hypotheses were tested in the statistical
analysis package R. The result is also presented in the same table:
Alternative Hypotheses Tested (H1)
cor
t statistic
p-value
null
There is a significant relation between Nifty and Auto
Sector Stock Prices (

)

0.8912184
t = 30.818
p-value < 2.2e-16
Reject
There is a significant relation between Nifty and Banking
Sector Stock Prices (

)

0.9505362 
t = 47.997
p-value < 2.2e-16
Reject
There is a significant relation between Nifty and Energy
Sector Stock Prices (

)

0.7281391 
t = 16.662
p-value < 2.2e-16
Reject
There is a significant relation between Nifty and Financial
Services
Sector Stock Prices (

)

0.9667073 
t = 59.254
p-value < 2.2e-16
Reject
There is a significant relation between Nifty and FMCG
Sector Stock Prices (

)

0.9493773 
t = 47.401
p-value < 2.2e-16
Reject
There is a significant relation between Nifty and IT Sector
Stock Prices (

)

-0.2059671 
t = -3.3013
p-value = 0.001105
Reject
There is a significant relation between Nifty and Media
Sector Stock Prices (

)

0.9505844 
t = 48.022
p-value < 2.2e-16
Reject
There is a significant relation between Nifty and Metal
Sector Stock Prices (

)

0.7204613
t = 16.294
p-value < 2.2e-16
Reject
There is a significant relation between Nifty and Pharma
Sector Stock Prices (

)

0.09299627
t = 1.4649
p-value = 0.1442
Fail to reject
There is a significant relation between Nifty and Pvt. Bank
Sector Stock Prices (

)

0.9705643 
t = 63.206
p-value < 2.2e-16
Reject
There is a significant relation between Nifty and PSU Bank
Sector Stock Prices (

)

0.7686472 
t = 18.847
p-value < 2.2e-16
Reject
There is a significant relation between Nifty and Realty
Sector Stock Prices (

)

0.8166621 
t = 22.195
p-value < 2.2e-16
Reject
There is a significant relation between Nifty and Commodity
Sector Stock Prices (

)

0.8218225 
t = 22.624
p-value < 2.2e-16
Reject
There is a significant relation between Nifty and Infra
Sector Stock Prices (

)

0.9444792 
t = 45.085
p-value < 2.2e-16
Reject
There is a significant relation between Nifty and Tata Group
Stock Prices (

)

0.7685794 
t = 18.843
p-value < 2.2e-16
Reject
There is a significant relation between Nifty and Aditya Birla
Group
Stock Prices (

)

0.9524415 
t = 49.023
p-value < 2.2e-16
Reject
There is a significant relation between Nifty and Mahindra
Group
Stock Prices (

)

0.3520583
t = 5.8995
p-value = 1.2e-08
Reject
Thus, we can infer the below:
>  
All the sectors studied above, except IT are
positively correlated with overall market
>  
IT sector has demonstrated a negative
association with overall market
>  
The relation between pharma and overall market
cannot be established with statistical accuracy
>  
Among the corporate groups studied, Mahindra
group is found to be least associated with overall market compared to Tata and
Aditya Birla Group
Based on above results, we can also say that IT sector
is highly sensitive to events like US elections, Brexit and rupee stability, as
these were the events that could be majorly attributed to have impacted the IT
stock prices in the last financial year.
Sources: NSE India, Google Finance & YouTube | Analysis
Packages
: R-Studio 3.3.3 & MS-Excel 2013
Author is a faculty in Finance @ International
School of Management Excellence, Bangalore
(www.isme.in)
Feedback: kirankvk@isme.in
Share this Post: Facebook Twitter Pinterest Google Plus StumbleUpon Reddit RSS Email

Related Posts

Leave a Comment