EQUITY PRICE DETERMINANTS OF INDIA'S NIFTY NEXT 50 INDEX FIRMS'
Keywords:
Equity Price, Determinants, Regression, EVA, India.
Abstract
An investor must perform research on a stock before investing in it. It becomes critical for a financially savvy investor. As a result, stock prices have long been a source of attraction. Researchers have worked hard to identify the elements influencing stock prices and returns. This paper is an attempt to identify the factors predicting the market price of Equity in India. The secondary data about 2017 to 2022 of NIFTY's Next 50 index companies is analyzed using OLS regression. The findings of the regression are ratified through a qualitative approach by the semi-structured open-ended survey and interviewing experts. The obtained responses are transcribed and coded. Matrix coding has been performed using a qualitative tool such as NVivo to understand the pattern of codes. The study finds that dividend rate, book value, and return on net worth are statistically significant and positively influence the market price of sample firms. Debt to equity ratio has a negative impact on market price. Economic value added (EVA) was found to be a new variable that significantly impacted the market price of shares. The study findings are helpful to the market participants to make wise and knowledge-based investment decisions. The study's findings will also add to the existing body of knowledge regarding stock valuation.
JEL Classification Codes: C53, C55, G12, G17, O16.
References
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Goyal, A. K., & Gupta, A. (2019). Financial determinants of stock prices: A study of Bombay Stock Exchange (BSE). International Journal of Advance and Innovative Research, 6(2), 107-112.
Irfan, C. M., Nishat, M., & Sharif, H. (2002). Key Fundamental Factors and Long-run Price Changes in an Emerging Market—A Case Study of Karachi Stock Exchange (KSE)[with Comments]. The Pakistan Development Review, 41(4), 517-533. http://www.jstor.org/stable/41263366
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Karathanassis, G., & Philippas, N. (1988). Estimation of bank stock price parameters and the variance components model. Applied Economics, 20(4), 497-507. https://doi.org/10.1080/00036848800000060
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Kotha, K. K., & Bhawna, S. (2016). Macroeconomic factors and the Indian stock market: Exploring long and short run relationships. International Journal of Economics and Financial Issues, 6(3), 1081-1091.
Midani, M. A. (1991). Determinants of Kuwaiti stock prices: An empirical investigation of industrial services, and food company shares, 314-325
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Nickerson, J. A., & Zenger, T. R. (2004). A knowledge-based theory of the firm—The problem-solving perspective. Organization science, 15(6), 617-632. https://doi.org/10.1287/orsc.1040.0093
Nirmala, P. S., Sanju, P. S., & Ramachandran, M. (2011). Determinants of share prices in India. Journal of emerging trends in economics and management sciences, 2(2), 124-130.
Rangi, P. K., & Aithal, P. S. (2021). Literature Survey and Research Agenda of Risk Determinants in Indian Equities and Machine Learning. International Journal of Management, Technology, and Social Sciences (IJMTS), 6(1), 83-109. http://dx.doi.org/10.2139/ssrn.3805394
Saputra, F. (2022). Analysis of Total Debt, Revenue and Net Profit on Stock Prices of Foods And Beverages Companies on the Indonesia Stock Exchange (IDX) Period 2018-2021. Journal of Accounting and Finance Management, 3(1), 10-20. https://doi.org/10.38035/jafm.v3i1.64
Sehgal, S., & Pandey, A. (2010). Equity valuation using price multiples: evidence from India. Asian Academy of Management Journal of Accounting and Finance, 6(1), 89-108.
Sharma, S. (2011). Determinants of equity share prices in India. Researchers World, 2(4), 51–60. Retrieved from https://www.researchersworld.com/index.php/rworld/article/view/303
Somoye, R. O., Akintoye, I. R., & Oseni, J. E. (2009). Determinants of equity prices in the stock markets. International Research Journal of Finance and Economics, 30(13), 177-189.
Srinivasan, P. (2012). Determinants of equity share prices in India: A panel data approach. The Romanian Economic Journal, 46(6), 205-228.
Srivastava, R. M. (1984). Testing Modigliani-Millers dividend valuation model in Indian context-A case study of 327 joint stock companies. Management Accountant, 19(11), 641-642.
Sukhija, S. (2014). Fundamental Determinants affecting Equity Share Prices of BSE-200 Companies in India. European Journal of Business and Management, 6(31), 160-170.
Tandon, K., & Malhotra, N. (2013). Determinants of stock prices: Empirical evidence from NSE 100 companies. International Journal of Research in Management & Technology, 3(3), 1-10.
Trejo Pech, C. O., Noguera, M., & White, S. (2015). Financial ratios used by equity analysts in Mexico and stock returns. Contaduría y administración, 60(3), 578-592. http://dx.doi.org/10.1016/j.cya.2015.02.001
Uddin, M. B. (2009). Determinants of market price of stock: A study on bank leasing and insurance companies of Bangladesh. Journal of modern Accounting and Auditing, 5(7), 1-6. https://doi.org/10.17265/1548-6583/2009.07.001
Wippern, R. F. (1966). Financial Structure and the Value of the Firm. The Journal of Finance, 21(4), 615-633. https://doi.org/10.1111/j.1540-6261.1966.tb00270.x
Zahir, M. A., & Khanna, Y. (1982). Determinants of stock prices in India. The Chartered Accountant, 30(8), 521-523.
Almashaqbeh, M., Islam, M. A., & Bakar, R. (2021, May). Factors affecting share prices: A literature revisit. In AIP Conference Proceedings (Vol. 2339, No. 1, p. 020143). AIP Publishing LLC. https://doi.org/10.1063/5.0045110
Almumani, M. A. (2014). Determinants of equity share prices of the listed banks in Amman stock exchange: Quantitative approach. International Journal of Business and Social Science, 5(1), 1-14. Retrieved from https://ijbssnet.com/journals/Vol_5_No_1_January_2014/12.pdf
Al-Omar, H., & Al-Mutairi, A. (2008). The relationship between the Kuwaiti banks share Prices and their attributes. Scientific Journal of King Faisal University, 9(1), 325-338.
Balke, N. S., & Wohar, M. E. (2006). What drives stock prices? Identifying the determinants of stock price movements. Southern Economic Journal, 73(1), 55-78. https://doi.org/10.1002/j.2325-8012.2006.tb00757.x
Balkrishnan, X. (1984). Determinants of equity prices in India. Management accountant, 19(12), 728-730.
Bhatt, P., & Sumangala, J. K. (2013). Impact of Book Value on Market Value of an Equity Share–an Empirical Study in Indian Capital Market. Indian Journal of Applied Research, 3(2), 49-51.
Budi, H. S. M., & Davianti, A. (2022). Firms’ Profitability and Stock Returns: Does it Always Affect Positively? International Journal of Social Science and Business, 6(1), 103-109. https://doi.org/10.23887/ijssb.v6i1.41927
Chawla, D., & Srinivasan, G. (1987). Impact of dividend and retention on share price-An econometric study. Decision, 14(3), 137-140.
Choiriyah, C., Fatimah, F., Agustina, S., & Ulfa, U. (2020). The effect of return on assets, return on Equity, net profit margin, earning per share, and operating profit margin on stock prices of banking companies in Indonesia Stock Exchange. International Journal of Finance Research, 1(2), 103-123. https://doi.org/10.47747/ijfr.v1i2.280
Collins, J. (1957). How to study the behavior of bank stocks. Financial Analysts Journal, 13(2), 109-113. https://doi.org/10.2469/faj.v13.n2.109
Gill, A., Biger, N., & Mathur, N. (2012). Determinants of equity share prices: Evidence from American firms. International Research Journal of Finance and Economics, 90(90), 176-192.
Goyal, A. K., & Gupta, A. (2019). Financial determinants of stock prices: A study of Bombay Stock Exchange (BSE). International Journal of Advance and Innovative Research, 6(2), 107-112.
Irfan, C. M., Nishat, M., & Sharif, H. (2002). Key Fundamental Factors and Long-run Price Changes in an Emerging Market—A Case Study of Karachi Stock Exchange (KSE)[with Comments]. The Pakistan Development Review, 41(4), 517-533. http://www.jstor.org/stable/41263366
Jadhav, J. G., & Badade, K. S. (2012). Determinants of share prices: An empirical study on the service sector in India. Indian Journal of Finance, 6(8), 12-24. Retrieved from https://www.indianjournaloffinance.co.in/index.php/IJF/article/view/72399
Karathanassis, G., & Philippas, N. (1988). Estimation of bank stock price parameters and the variance components model. Applied Economics, 20(4), 497-507. https://doi.org/10.1080/00036848800000060
Kaur, D., & Gupta, M. (2021). Banks and insurance companies preferences for firm specific attributes: A study of indian equity market. Indian Journal of Economics and Development, 17(1), 143-149. https://doi.org/10.35716/IJED/20220
Kotha, K. K., & Bhawna, S. (2016). Macroeconomic factors and the Indian stock market: Exploring long and short run relationships. International Journal of Economics and Financial Issues, 6(3), 1081-1091.
Midani, M. A. (1991). Determinants of Kuwaiti stock prices: An empirical investigation of industrial services, and food company shares, 314-325
Nautiyal, N., & Kavidayal, P. C. (2018). Analysis of institutional factors affecting share prices: The case of national stock exchange. Global Business Review, 19(3), 707-721. https://doi.org/10.1177/0972150917713865
Nickerson, J. A., & Zenger, T. R. (2004). A knowledge-based theory of the firm—The problem-solving perspective. Organization science, 15(6), 617-632. https://doi.org/10.1287/orsc.1040.0093
Nirmala, P. S., Sanju, P. S., & Ramachandran, M. (2011). Determinants of share prices in India. Journal of emerging trends in economics and management sciences, 2(2), 124-130.
Rangi, P. K., & Aithal, P. S. (2021). Literature Survey and Research Agenda of Risk Determinants in Indian Equities and Machine Learning. International Journal of Management, Technology, and Social Sciences (IJMTS), 6(1), 83-109. http://dx.doi.org/10.2139/ssrn.3805394
Saputra, F. (2022). Analysis of Total Debt, Revenue and Net Profit on Stock Prices of Foods And Beverages Companies on the Indonesia Stock Exchange (IDX) Period 2018-2021. Journal of Accounting and Finance Management, 3(1), 10-20. https://doi.org/10.38035/jafm.v3i1.64
Sehgal, S., & Pandey, A. (2010). Equity valuation using price multiples: evidence from India. Asian Academy of Management Journal of Accounting and Finance, 6(1), 89-108.
Sharma, S. (2011). Determinants of equity share prices in India. Researchers World, 2(4), 51–60. Retrieved from https://www.researchersworld.com/index.php/rworld/article/view/303
Somoye, R. O., Akintoye, I. R., & Oseni, J. E. (2009). Determinants of equity prices in the stock markets. International Research Journal of Finance and Economics, 30(13), 177-189.
Srinivasan, P. (2012). Determinants of equity share prices in India: A panel data approach. The Romanian Economic Journal, 46(6), 205-228.
Srivastava, R. M. (1984). Testing Modigliani-Millers dividend valuation model in Indian context-A case study of 327 joint stock companies. Management Accountant, 19(11), 641-642.
Sukhija, S. (2014). Fundamental Determinants affecting Equity Share Prices of BSE-200 Companies in India. European Journal of Business and Management, 6(31), 160-170.
Tandon, K., & Malhotra, N. (2013). Determinants of stock prices: Empirical evidence from NSE 100 companies. International Journal of Research in Management & Technology, 3(3), 1-10.
Trejo Pech, C. O., Noguera, M., & White, S. (2015). Financial ratios used by equity analysts in Mexico and stock returns. Contaduría y administración, 60(3), 578-592. http://dx.doi.org/10.1016/j.cya.2015.02.001
Uddin, M. B. (2009). Determinants of market price of stock: A study on bank leasing and insurance companies of Bangladesh. Journal of modern Accounting and Auditing, 5(7), 1-6. https://doi.org/10.17265/1548-6583/2009.07.001
Wippern, R. F. (1966). Financial Structure and the Value of the Firm. The Journal of Finance, 21(4), 615-633. https://doi.org/10.1111/j.1540-6261.1966.tb00270.x
Zahir, M. A., & Khanna, Y. (1982). Determinants of stock prices in India. The Chartered Accountant, 30(8), 521-523.
Published
2023-12-17
How to Cite
Hedau, A., & Mishra, S. (2023). EQUITY PRICE DETERMINANTS OF INDIA’S NIFTY NEXT 50 INDEX FIRMS’. Indian Journal of Finance and Banking, 13(2), 14-22. https://doi.org/10.46281/ijfb.v13i2.2148
Section
Regular Research Article/ Short Communication Article
Copyright (c) 2023 Amit Hedau, Sarbesh Mishra
This work is licensed under a Creative Commons Attribution 4.0 International License.
