Identifying the Financial Ratios That May Have an Impact on the Stock Prices of Companies in Various Industrial Sectors of India

Authors

  • Ashit Agarwal, Arunava Saha

Abstract

 The aim of this research paper is to identify if different financial ratios have a relation with the company stock prices in different industrial sectors of India. The companies chosen for analysis are the leaders of their own sectors and form a part of the BSE top 30 companies index. The companies selected are ITC Limited, a leading fast-moving consumer goods company, Sun Pharmaceutical Industries Limited, a leading pharmaceutical company, and Maruti Suzuki India Limited, a leading automobile manufacturing company. The financial ratios that have been chosen for analysis have been selected based on the past research carried out in this field. The methodology for analysis includes individual analysis of each company from the selected sectors. This includes determining the Pearson correlation coefficient of each financial ratio against the dependent variable, i.e., the stock price of the company. Further, hypothesis testing has been done using linear regression of each independent variable against the dependent variable and a multiple linear regression model is developed if multiple independent variables are found to be significant. Secondary data sources have been used to collect data. Through this study, we are able to understand which financial ratio is significant in each sector of study and can be used as a metric for understanding the stock price movement of a company in that particular sector.

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Published

2020-05-17

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Section

Articles