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International Journal of Advanced Scientific

e-ISSN: 2395-6089
Research & Development
Vol. 03, Spl. Iss. 03, Ver. I, Sep 2016, pp. 74 80

p-ISSN: 2394-8906

A Study on the Stock Market Movement and Developments in

the Automobile Industry
G. POOJITHA
Assistant Professor, Department of Bank Management, Ethiraj College for Women, Chennai.

ARTICLE INFO

ABSTRACT

Article History:

Automobile industry is one of the major industrial sectors

in India. Subsequent to the liberalization policy, this sector
has witnessed a tremendous growth during the last two
decades. It occupies a prominent place in the Indian
economy as it plays an essential role in the economic and
industrial developments in the country. The Automobile
Industry provides significant employment opportunities
and significantly contributes to the development of the
country. All these points have attracted the investors to
invest in this sector. This study attempts to analyze
relative changes in the stock price and the developments. It
was found out that with the advent of technological
developments in the field, the sector not only had grown up
as an industry that plays a vital role in the economy, but
also had boosted the investors confidence by performing so
well in the share market. It was understood that the
innovations in the automobile industry over the past few
years have a significant effect on the investing pattern of
the investors and also in the boom/ depression of the share
market.

Received: 24 Sep 2016;

Accepted: 24 Sep 2016;
Published online: 28 Sep 2016.

Key words:
Automobile Industry,
Recent Developments,
Stock Market

JEC Classification:

Copyright 2016 IJASRD. This is an open access article distributed under the Creative Common Attibution
License, which permits unrestricted use, distribution, and reproduction in any medium, provided the original
work is properly cited.

INTRODUCTION
The Automobile Industry in India is one of the largest in the world with a GDP
accounting to 7.1%. The growth rate is mainly because of exports with a growth of
18.36% in the year over 2015. The Government of India proposes to develop the Auto
Industry and upgrade it to be regarded as Research & Development (R&D) hub, by
setting up National Automotive Testing and R&D infrastructure project (NATRIP)
which acts as a facilitator between the Industry and the Government.
How to cite this article: Poojitha, G. (2016). A Study on the Stock Market Movement and Developments in the
Automobile Industry. International Journal of Advanced Scientific Research & Development (IJASRD), 03 (03/I), [Special
Issue Sep 2016], pp. 74 80.

A Study on the Stock Market Movement and Developments in the Automobile Industry

In order to cope up with the ever increasing demand, several automakers have
started investing enormously in different segments of the industry. While attracting as
much as 14.32 billion US$ as FDI between April 2000 and December 2015, the industry
to striving towards the following developments:
To promote Eco-friendly products
The fourth and worlds largest scooter plant was opened by the Honda Motorcycle
and Scooter India (HMSI) duo in Gujarat with an aim to produce around 600000
scooters p.a., in order to achieve 1.2 million scooters p.a., by the middle of 2016.
Indian auto industry has even attracted the worlds largest air bag suppliers
Autoliv, Takata Corp, TRW Automotive Inc and Toyoda Gosei Co to set up plants
and to increase the capacity
Mercedes Benz has announced to manufacture the GLA entry SUV in Indian
territories.
The industry has also encouraged the debut production of Fords iconic Ford
Mustang in the second quarter of FY 2016. It is expected to be within the price
band of Rs 45 lakhs to Rs 50 lakhs.
India-based auto parts makers are giving inputs to the German based luxury car
maker BMW
1.1 Government Initiatives
The Government of India has proved to be very encouraging with regard to the
Automobile industry by injecting 100% FDI into the sector. Some of the major initiatives
are put down:
An independent Department for Transport, comprising of experts from various
parts of the industry is expected to be set up with the main aim of resolving
issues relating to technological aspects.
Since the passenger vehicles market is expected to triple to 9.4 million units by
2026, the Government aims to make automobiles manufacturing the main driver
of Make in India initiative.
The Government has announced to provide credit of 850000 crore to farmers ( as
per the Union budget 2015-16) which in turn is expected to boost the sales of
tractor segment
To promote eco-friendly cars and also the government has made mandatory of 5%
of ethanol blending in petrol.
The Automobile Mission Plan (AMP) for the period 2006-2016 was structured in
a way to accelerate and sustain the growth in this sector.
1.2 Review of Literature:
Shanmugasundram & Benedict (2013) studied risk factor in the Indian Sectoral
indices and Nifty and also see the risk relationship in varied time period. Authors had
selected five Sectoral indices which includes CNX Auto Index and Nifty Index for their
study for eight years i.e. from 2004 to 2012. T-Test (two samples) and ANOVA (one way)
was carried out to measure the risk difference between the sectors and Nifty and risk
across time interval was measured using one-way ANOVA. At the end they concluded
75

Volume 03, Special Issue 03, Version I | 28th September 2016

Emerging Innovative Strategies in Business Creating a Competitive Edge | Organized by PG

Department of Banking & Insurance Management and Department of Bank Management,
Ethiraj College for Women (Autonomous), Chennai 600 008.

that there is no difference in standard deviation among various Sectoral Indices but
there is a significant difference in the mean score at various time intervals.
Lakshmi, (2013) using Autoregressive Conditional Heteroskedasticity measured
the volatility pattern in various Sectoral Indices in Indian stock market. A study was
conducted for the period starting 2008 till 2012. All eleven Sectoral Indices from MSE
including CNX Auto was considered for research. At the end researcher concluded that
the reality sector has highest volatility than any other sector what accounts to around
80% whereas Nifty measured around 20%. Whereas the banking sector has lowest
volatility for test period which struggled around 12%.
Guha, Dutta & Bandyopadhyay (2016) made an attempt to measure the risk vs.
return of Indian sectoral indices. For their study they compared eleven sectoral indices
of NSE including CNX Auto index with CNX Nifty. The objective of their study was to
measure the performances and sensitivity of different sectors with Nifty as the base. It
was concluded that Realty, Metal and IT sectors vary significantly from Nifty, whereas
FMCG, Pharma and Auto sectors show a very little change with respect to Nifty.
1.3 Objective of the Study
The study attempts to identify the risk return relationship of automobile sector
with sensex as the base. And, it aims to analyze the impact of innovations in the
industry with stock market movements.
RESEARCH METHODOLOGY
In effort of satisfying the objective on analysis of stock market movement, the
daily closing prices of S&P BSE Sensex and S&P BSE Auto index for five years (20102015) have been taken. An effort has been made to determine the risk return
relationship of auto index with Sensex as the base. The analysis was carried out using T
test and Levenes test for equality of variances. Both null and alternate hypothesis was
framed for daily, weekly, fortnightly and monthly results.
RESULTS AND DISCUSSION
3.1 Independent Sample t Test
The independent-samples t-test or independent t-test compares the means
between two unrelated groups on the same continuous dependent variable. To be precise
it is used to determine if there is a difference in one variable based on another variable.
In this study, t-test is used to determine if there is any significant difference in market
index based on sectorial index.
3.2 Relationship between Auto Index and Sensex
3.2.1 Daily Results
H0: There is no significant difference between the variances of daily market index
(Sensex) and sectoral index (Auto Index)

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A Study on the Stock Market Movement and Developments in the Automobile Industry

H1: There is a significant difference between the variances of daily market index
(Sensex) and sectoral index (Auto Index)
Levenes Test for Daily Auto and Sensex
Levenes test for equality of variances
Equal variances assumed

SIG

24.974

0.000

Equal variances not assumed

Selected Variables: S&P BSE Sensex and S&P BSE Auto

Levenes test for equality of variances is a test that determines if the two conditions
have about the same or different amounts of variability between scores. From the above
table, we can see that the sig level for the Levenes test for equality of variances is
0.000 which is less than 0.05. This shows that there is a difference in the variances. So
equal variances not assumed
H0: There is no significant difference between the return of daily market index
(Sensex) and sectoral index (Auto Index)
H1: There is a significant difference between the return of daily market index
(Sensex) and sectoral index (Auto Index)
t Test of Daily Auto and Sensex
t- test for equality of means
T

Df

Sig (2-tailed)

Equal variances assumed

-0.804

2486

0.421

Equal variances not assumed

-0.804

2423.015

0.421

Selected Variables: S&P BSE Sensex and S&P BSE Auto

From the above table, the sig (2- tailed) is at 0.421 which is above 0.05. This means
that the daily mean return of auto index and Sensex is the same.
Accept H0: there is no significant difference between the return of daily market
index (Sensex) and sectoral index (Auto Index)
3.2.2 Weekly Results
H0: There is no significant difference between the variances of weekly market
index (Sensex) and sectoral index (auto index)
H1: There is a significant difference between the variances of weekly market
index (Sensex) and sectoral index (auto index)
Levenes Test for Weekly Auto and Sensex
Levenes test for equality of variances
Equal variances assumed

Sig.

42.534

0.000

Equal variances not assumed

Selected Variables: S&P BSE Sensex and S&P BSE Auto

77

Volume 03, Special Issue 03, Version I | 28th September 2016

Emerging Innovative Strategies in Business Creating a Competitive Edge | Organized by PG

Department of Banking & Insurance Management and Department of Bank Management,
Ethiraj College for Women (Autonomous), Chennai 600 008.

From the above table, the sig level for Levenes test is at 0.000. Since it is less
than 0.05, there is a difference in variances. So equal variances not assumed
H0: There is no significant difference between the return of weekly market index
(Sensex) and sectoral index (Auto Index)
H1: There is a significant difference between the return of weekly market index
(Sensex) and sectoral index (Auto Index)
T Test for Weekly Auto and Sensex
T- test for equality of means
T

Df

Sig (2- tailed)

Equal variances assumed

-1.699

2478

0.089

Equal variances not assumed

-1.699

2385.269

0.089

Selected Variables: S&P BSE Sensex and S&P BSE Auto

From the table we can say the following: the value of sig (2-tailed) against equal
variances not assumed gives us a value of 0.089. This is greater than 0.05 so it is
concluded that there is no statistical significant difference between the sectoral index
and market index.
Accept H0: there is no significant difference between the return of weekly
market index (Sensex) and sectoral index (Auto Index).
3.2.3 Fortnightly Results
H0: There is no significant difference between the variances of fortnightly market
index (Sensex) and sectoral index (Auto Index)
H1: There is a significant difference between the variances of fortnightly market
index (Sensex) and sectoral index (Auto Index)
Levenes Test for Fortnightly Auto and Sensex
Levenes test for equality of variances
Equal variances assumed

Sig.

39.656

0.000

Equal variances not assumed

Selected Variables: S&P BSE Sensex and S&P BSE Auto

The sig level for the Levenes test is at 0.000 which is less than 0.05. From this we can
say that there is a difference in variances. Therefore, equal variances not assumed
H0: There is no significant difference between the return of fortnightly market
index (Sensex) and sectoral index (Auto Index)
H1: There is a significant difference between the return of fortnightly market
index (Sensex) and sectoral index (Auto Index)
t Test for Fortnightly Auto and Sensex
t- test for equality of means
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A Study on the Stock Market Movement and Developments in the Automobile Industry
T

Df

Sig (2-tailed)

Equal variances assumed

-2.325

2470

0.020

Equal variances not assumed

-2.325

2394.158

0.020

Selected Variables: S&P BSE Sensex and S&P BSE Auto

The value of sig (2-tailed) against equal variances assumed is 0.020, which is less
than 0.05. This depicts that there are some differences between the variables. Thus, it is
concluded that there is a significant difference between the fortnightly market index
and sectoral index.
3.2.4 Monthly Results
H0: There is no significant difference between the variances of monthly market
index (Sensex) and sectoral index (auto index)
H1: There is a significant difference between the variances of monthly market
index (Sensex) and sectoral index (auto index)
Levenes Test for Monthly Auto and Sensex
Levenes test for equality of variances

Equal variances assumed

Sig.

51.560

0.000

Equal variances not assumed

Selected Variables: S&P BSE Sensex and S&P BSE Auto

Since the sig level of Levenes test is less than 0.05, it is found that there are some
differences in the variances. So it is said that equal variances not assumed
H0: There is no significant difference between the return of monthly market
index (Sensex) and sectoral index (Auto Index)
H1: There is a significant difference between the return of monthly market index
(Sensex) and sectoral index (Auto Index)
t Test For Monthly Auto And Sensex
t-test for equality of means
T

Df

Sig (2-tailed)

Equal variances assumed

-3.491

2446

0.000

Equal variances not assumed

-3.491

2344.799

0.000

Selected Variables: S&P BSE Sensex and S&P BSE Auto

The table depicts a sig level at 0.00 which is less than 0.05. From this we can say
that there is a difference in the returns. So there is a statistical significant difference
between the market index and sectoral index.
Group Statistics

Score

79

Std.
Std. Error
Deviation
Mean

Groups

Mean

Sensex Monthly

1224

.0083

.04782

.00137

Auto Monthly

1224

.0158

.05904

.00169

Volume 03, Special Issue 03, Version I | 28th September 2016

Emerging Innovative Strategies in Business Creating a Competitive Edge | Organized by PG

Department of Banking & Insurance Management and Department of Bank Management,
Ethiraj College for Women (Autonomous), Chennai 600 008.

The monthly return of the auto index is found to be higher than that of Sensex.
Accept H1: There is a significant difference between the return of monthly
market index (Sensex) and sectoral index (Auto Index)
CONCLUSION
Findings of the study reveal that, the daily, weekly, fortnightly returns do not
fetch as much return as monthly returns. We can infer that the sector serves better for
the long term investors. It should be noted that the period taken for the study had
witnessed a series of developments and reforms. With the advent of increasing
government initiatives and ever improving innovativeness in the Automobile sector in
the Indian Market this sector is likely to have an upper hand in the movements in the
stock market. We can say that the Automobile industry is performing well in the stock
market. Since it moves along with the Sensex it helps the investors to predict the
industrys movements in a better way. The boom in the industry might be due to the
recent technological developments and innovativeness. Since the Government also
provide a lot of cover for the automobile industry, the investors are open to invest in
such a sector which sees a new feature every single day. The confidence that the
industry has given to its investors is huge. On a concluding note, it is said that the
industry is likely to grow in a better way and for all those investors who seek a regular
income via dividends or for those who seek capital appreciation via increase in their
stock value, the Automobile sector proves to be a great option. Thus the recent
developments or the innovativeness in the Automobile industry has a positive impact on
the stock market.
REFERENCES
[1] Agarwal, N. (2015), Recent Growth Trends of Automobile Industry in India, Indian
Journal of Applied Research, 5 (7), pp. 376 378. DOI: 10.15373/2249555X.
[2] Guha, B., Dutta, A., & Bandyopadhyay, G. (2016). Measurement of Risk Vs Return
of Indian Sectoral Indices, Journal of Advanced Management Science, 4 (2), pp.
106 111.
[3] Lakshmi, S. P. (2013). Volatility Patterns in Various Sectoral Indices in Indian
Stock Market, Global Journal of Management and Business Studies, 3 (8), pp.
879-886.
[4] Shanmugasundram, G & Benedict, J. D. (2013), Volatility of the Indian Sectoral
Indices A Study with reference to National Stock Exchange, International
Journal of Marketing, Financial Services & Management Research, 2 (8), pp. 1
11.
[5] http://www.ibef.org/
[6] http://www.bseindia.com/

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