NIIT UNIVERSITY

RISK ANALYSIS AUTOMOBILE TWO

WHEELER
MANAGEMENT OF RISK - PROJECT

Abstract:
The Quarterly stock return and the quarterly profit growth of the three major automobile two
wheeler manufacturers of India are analysed with respect to the market growth rate and the GDP
growth of India and the relationship are derived by regression analysis.

Submitted to,
Mr. Alok kumar,
Professor,
NIIT University.

Submitted by,
Leoprabhu Ekambaram

P301313CMG443

RISK ANALYSIS AUTOMOBILE TWO WHEELER

1. Determination of Relationship between Stock return and Nifty Return

1.1 Bajaj Auto Limited
R

Adjusted R
Square
0.06

R Square

0.33

0.11

Intercept
Nifty
Return

Coefficie
nts
0.19

Standard
Error
0.09

0.45

0.3

Regression Equation
Correlation co-efficient
Standard deviation in stock return

Standard
Error
0.37

2.18

Pvalue
0.04

Lower
95%
0.01

Upper
95%
0.37

1.47

0.16

-0.19

1.09

t Stat

: Y (Bajaj Auto return) = 0.19+0.45*(Nifty return)

: 0.33
: 9.49% (for quarterly return)

1.2 TVS Motor Company

R
0.42

R Square
0.18

Intercept
Nifty
Return

Adjusted R
Square
0.13

Standard
Error
0.24

Coeffici
ents
0.06

Standard
Error
0.06

t Stat
1.13

P-value
0.27

Lower
95%
-0.05

Upper
95%
0.18

1.56

0.79

1.97

0.06

-0.10

3.21

Regression Equation
Correlation co-efficient
Standard deviation in stock return

: Y (TVS Motor return) = 0.06+1.56*(Nifty return)

: 0.42
: 25.67% (for quarterly return)

1.3 Hero MotoCorp

R

R Square

0.13

0.02

Intercept

Coeffici
ents
0.02

Adjusted R
Square
-0.04
Standard
Error
0.03

Standard
Error
0.12

t Stat
0.80

Pvalue
0.44

Lower
95%
-0.04

Upper
95%
0.08
2

RISK ANALYSIS AUTOMOBILE TWO WHEELER

Nifty
Return

0.21

0.38

Regression Equation
Correlation co-efficient
Standard deviation in stock return

0.55

0.59

-0.59

1.02

: Y (Hero Moto return) = 0.02+0.21*(Nifty return)

: 0.13
: 11.37% (for quarterly return)

2. Determination of Relationship between Company Profit and GDP

2.1 Bajaj Auto Limited
R
0.33

R Square
0.11

Intercept
GDP Growth

Coefficient
s
0.02
1.64

Adjusted R
Square
0.06

Standard
Error
0.28

Standard Error
0.07
1.11

0.37
1.48

Regression Equation
Correlation co-efficient
Std. deviation in Quarterly Profit

t Stat

P-value
0.71
0.16

Lower 95%
-0.11
-0.69

Upper 95%
0.16
3.97

: Y (Bajaj Auto Profit) = 0.02+1.64*(GDP growth)

: 0.33
: 29.06% (for Quarterly profit)

2.2 TVS Motor Company

R

R Square

0.02

0.00

Intercept
GDP Growth

Coefficient
s
-0.10
0.21

Adjusted R
Square
-0.06
Standard Error
0.19
3.16

Regression Equation
Correlation co-efficient
Std. deviation in Quarterly Profit

Standard
Error
0.80
t Stat
-0.54
0.07

P-value
0.60
0.95

Lower 95%
-0.49
-6.42

Upper 95%
0.29
6.85

: Y (TVS Motor Profit) = -0.1+0.21*(GDP growth)

: 0.02
: 78.16% (for quarterly profit)

2.3 Hero MotoCorp

R
0.07

R Square
0.00

Adjusted R
Square
-0.05

Standard
Error
0.15
3

RISK ANALYSIS AUTOMOBILE TWO WHEELER

Intercept
GDP
Growth

Coefficient
s
0.02

Standard Error
0.03

0.17

0.58

Regression Equation
Correlation co-efficient
Std. deviation in Quarterly Profit

t Stat
0.57

P-value
0.58

Lower 95%
-0.05

Upper 95%
0.09

0.30

0.77

-1.05

1.40

: Y (Hero Moto Profit) = 0.02+0.17*(GDP growth)

: 0.07
: 14.48% (for quarterly profit)

3. Inference:
1. The Unsystematic risk in share value for the three major Automobile two wheeler
manufacturer in India namely Bajaj Auto, TVS Motor company and Hero Moto Corp on
quarterly basis are 9.49%, 25.67% and 11.37% respectively which is in-line with the
volatility in the in the quarterly profit 29.06%, 78.16% and 14.48%.
2. The
which
by beta
stock
follows,

Company
Bajaj Auto
TVS Motor Company
Hero MotoCorp

Beta value
0.45
1.56
0.21

Systematic risk
can be obtained
value of the
price is as

This shows the TVS motor company share return is highly reactive to market and the
Hero MotoCorp return is the least reactive to market return.
3. The beta value of profit with respect to GDP growth is as follows,
Company
Bajaj Auto
TVS Motor Company
Hero MotoCorp

Beta value
1.64
0.21
0.17

This shows the Bajaj Auto return is highly reactive to GDP and the Hero MotoCorp return is the
least reactive to GDP growth.
4. The correlation between the GDP growth rate and the companys quarterly profits are
very low this is justifiable considering the below scenario in India.
1. GDP contribution from automobile industry in India is only 4%
2. The major share of Indian automobile market is occupied by the above three
companies thus the gain in market of one is by the loss of market by the other
4

RISK ANALYSIS AUTOMOBILE TWO WHEELER

player.
3. The growth of automobile industry is about 15% for the period under
consideration vs the GDP growth of 20%
However the Correlation between the GDP growth and the growth in combine profit of the three
companies are medium with correlation co-efficient 0.28.
5. On seeing the regression equations and beta value there exists less or no correlation between
nifty growth and GDP growth this is justifiable as the market growth is due to foreign
investment and foreign investment inflow is by comparing the GDP of various countries in a
particular year and not the GDP of individual country over years.