INTRODUCTION:

The data mining and its tool has played a vital role in exploring the data from different ware houses. Using data mining tools and analytical technologies we do a quantifiable amount of research to explore new approach for the investment decisions. The market with huge volume of investor with good enough knowledge and have a prediction as well as control over their investments⁴. Analysis and prediction of stock market time series data has attracted considerable interest from the research community over the last decade. Rapid development and evolution of sophisticated algorithms for statistical analysis of time series data, and availability of high-performance hardware has made it possible to process and analyze high volume stock market time series data effectively, in real-time⁶. In this paper we focus on the real-world problem in the stock market.

India's pharmaceutical sector serves as a crucial player in satisfying global demand, supplying over 50% of various vaccines, meeting 40% of US public demand, and catering to 25% of medicines consumed in the UK. According to the Economic Survey of India 2021, the domestic market is poised to triple in size over the next decade. With a valuation of $42 billion in 2021, the domestic pharmaceutical market is projected to soar to $65 billion by 2024 and further expand to $120-130 billion by 2030. In January 2022, India's pharmaceutical market experienced a robust growth of 13.9% in overall revenue. As a global frontrunner, India commands around 60% of the total volume of vaccines, with CARE Ratings forecasting an annual growth rate of 11%, surpassing $60 billion within the next two years¹.

The pharmaceutical industry in India comprises an extensive network of 3,000 companies and 10,500 manufacturing units, consolidating the nation's influential role in the global pharmaceutical arena. Notably, Indian pharmaceutical firms supply over 80% of the world's antiretroviral drugs used in combating AIDS, a testament to India's reputation as the "pharmacy of the world" due to its provision of affordable, high-quality medications¹.

The pharmaceutical sector in India has experienced substantial growth, fuelled by investments and government backing. Foreign direct investments (FDI) in the pharmaceutical industry have surged to $19.9 billion from April 2000 to June 2022. In September 2022, pharmaceutical imports and exports reached $2196.32 million. Additionally, the medical device industry is forecasted to achieve a Compound Annual Growth Rate (CAGR) of 15%, reaching $50 billion by 2030⁷.

Furthermore, India boasts the highest number of US Food and Drug Administration (USFDA)-compliant pharmaceutical manufacturing facilities and is home to 500 active pharmaceutical ingredient (API) manufacturers, constituting approximately 8% of the global API market. With a remarkable evolution over time, the Indian pharmaceutical industry now stands as the third-largest pharmaceutical manufacturing entity by volume and ranks 14th globally in terms of value, contributing around 1.72% to India's GDP¹.

Projections indicate a promising future for the Indian pharmaceutical market, with an estimated value of USD 130 billion by the end of 2030, as per a recent EY FICCI report. Simultaneously, the global pharmaceutical products market is expected to surpass the $1 trillion mark by 2023 [9]. Recent industry developments include Lupin's acquisition agreement of two inhaler brands from Sunovion Pharmaceuticals in October 2022 and Dr. Reddy's Laboratories' launch of lenalidomide capsules with 180-day exclusivity in two strengths in the US in September 2022⁷.

In July 2022, Cipla Health inked a deal to acquire Endura Mass, a well-known nutritional supplement. In June 2022, Cipla introduced a four-in-one antiretroviral treatment for children afflicted with HIV in South Africa, a venture undertaken in collaboration with the Drugs for Neglected Diseases Initiative (DNDI). Moreover, in May 2022, Dr Reddy's Laboratories unveiled an exclusive partnership with HK Inno. Company N to market the novel molecule tegoperazan in India and specific emerging markets¹.

India holds the esteemed position of being the third-largest pharmaceutical industry globally, primarily driven by its robust production volume, with a promising growth trajectory anticipated in the upcoming years. Healthcare expenditure is forecasted to increase by 9–12% over the next five years, positioning India among the top 10 countries worldwide. The emphasis of companies on treating chronic diseases such as cardiovascular diseases, diabetes, depression, and cancer, which are witnessing heightened demand, will greatly influence future domestic sales growth. The ongoing introduction of generic drugs into the market is a significant area of interest and is expected to be advantageous for Indian pharmaceutical firms¹.

In comprehending stock market dynamics, analyzing stock market volatility assumes paramount importance. This study aims to scrutinize the stock prices of four prominent pharmaceutical entities: Lupin Limited, Cipla Limited, Dr. Reddy's Laboratories Limited, and Torrent Pharmaceuticals Limited.

OBJECTIVE:

The objective of this is to analyse selected stocks using data taken from secondary sources. The study aims to gain insights into the trends and risks associated with the selected pharmaceutical companies, thereby aiding investors in making informed decisions regarding buying or selling stocks⁴.

The main objective of this paper is the comparative evaluation of stock prices in four selected pharmaceutical industries, with the following specific objectives:

· Conduct a descriptive analysis of stock prices.

· Evaluate the price performance of the selected stocks using the Money Flow indicator.

· By the use of Beta Index, examine the associated volatility and risk with stock prices.

· Forecast the price movement of the selected stocks for a four-year period using the ARIMA model.

MATERIAL AND METHODS:

The present study focuses on analysing the stock price movements of four pharmaceutical companies - Lupin Limited, Cipla Limited, Dr. Reddy's Laboratories, and Torrent Pharmaceuticals, all of which are listed on the National Stock Exchange (NSE). These companies were selected based on specific criteria, including their market capitalization, more than 40 years of business operations, and reputation for undertaking large-scale manufacturing projects. Data related to the closing, opening, monthly high, and low prices of their stocks were collected from reliable secondary sources, including the Yahoo Finance website. The data covers the period from April 2013 to December 2019.

The analysis is done using statistical methods, which includes descriptive statistics, histograms, box plots, Money Flow Index, and beta index, to assess the technical strength of the stocks. To interpret the financial health of the selected companies, this research employed a range of statistical tools, encompassing both simple descriptive statistics and advanced statistical methods, all executed using R software. Simple descriptive statistics, such as mean, median, quartiles, and standard deviation, were utilized to gain necessary insights and comprehend the underlying characteristics of the stock.

RESULTS AND DISCUSSION:

The stock price trends of four pharmaceutical companies were subjected to statistical analysis for a period of 6.66 years, from April 2013 to December 2019. Additionally, based on data from April 2013 to July 2023, the stock prices of these companies were forecasted and presented for a 48-month period.

Basic features of the analysis:

Figures 1–4 display the summary statistics of closing prices for all four stocks. The analysis reveals a decline in the values of all four stocks during the study period. Dr. Reddy's Laboratories Limited had the highest closing price (2366.05), followed by Lupin Limited (1331.4), Torrent Pharmaceuticals Limited (802.4375), and Cipla Limited (341.9). Whereas, Torrent Pharmaceuticals Limited experienced the highest percentage gain in share price to reach an all-time high, followed by Dr. Reddy's Laboratories Limited and Cipla Limited. In contrast, Lupin Limited showed the lowest profit among the surveyed companies from April 2013 to December 2019. This indicates that Lupin had an excessive absolute capital over the analysed period, while CIPLA had relatively less capital per share. It is worth noting that these price increases were not unique to the pharmaceutical sector but were influenced by overall market trends during the study period (the Nifty 50 also rose proportionately).

Moreover, it is observed from figures 1–4that Dr. Reddy's Laboratories Limited had the highest average security prices (2807) compared to Lupin Limited (1176.7), Torrent Pharmaceuticals Limited (623.7), and CIPLA Limited (545.9) during the review period. On the other hand, CIPLA Limited had the lowest average stock price during the same period. These observations suggest that fluctuations were more significant in the cases of Lupin and Torrent Pharmaceuticals Limited compared to CIPLA Limited, while Dr. Reddy's Laboratories Limited experienced minimal variation. The median values, along with the stock's maximum and minimum values, indicate that Lupin's price experienced a steady and rapid decline compared to the other stocks. Meanwhile, the share prices of CIPLA Limited and Dr. Reddy's Laboratories Limited remained relatively stable during the period. However, to assess stock price variance more comprehensively, normality checks were conducted using histogram distributions and box plots.

For all four stocks, the box plots revealed a skewed distribution, the whisker’s lower end displayed negative values for the closing prices. Among the histograms of all four stocks, only Dr. Reddy's Laboratories Limited exhibited a symmetrical distribution along the central values, with some outliers. Additionally, the red line of normal distribution curve demonstrated deviations from normal for all stocks. It is important to note that modelling stock prices cannot simply be simply based on the assumption that a large sample will follow a normal distribution. Instead, one must consider either reducing any existing trend or exploring other statistical distributions for more accurate modelling³.

Figure 1: Summary statistics with histogram and box plot for Dr. Reddy's Laboratories Limited

Figure 2: Summar statistics with histogram and boxplot for Lupin Limited.

Figure 3: Summar statistics with histogram and boxplot for Torrent Pharmaceuticals Limited.

Figure 4: Summary statistics with histogram and box plot for CIPLA LIMITED.

Figure 5: Box plot Comparison of Four Stocks.

Money Flow Analysis:

Throughout the trading day, if there's a higher volume of stock purchases during an uptrend compared to a downtrend, it results in a positive net cash flow since more investors are willing to pay a premium for the stock. Conversely, a negative cash flow during a rising stock price might suggest an imminent price reversal. The Money Flow Index (MFI) is utilized to analyze the net cash flow entering and exiting the market for the four stocks, as illustrated in Figure 6. Positive MFI values indicate a higher inflow of money, with different values for each stock. This positive cash flow is crucial for sustained long-term growth of a company. Among the stocks, Torrent Pharmaceuticals Limited showed the highest MFI value. However, it is important to note that the overall capital market trends (NSE) influence the individual company’s MFI value⁴.

Figure 6: Money Flow Index of selected companies’ stocks

Volatility Analysis:

Stocks volatility, measured using beta index, is compared and analysed in figure 7. Positive beta index values for all four stocks indicate relatively high volatility compared to the overall market indices, such as the Nifty 50. Positive values indicate a negative correlation between the stock price of the analysed company and the overall market index. Out of the various stock categories, monthly highs demonstrated the highest level of volatility, whereas monthly lows exhibited the least volatility. From an investor's perspective, the closing price of the stock is more significant. Dr. Reddy's Laboratories Limited was found to be the most unstable, followed by Torrent Pharmaceuticals Limited, Lupin Limited, and Cipla Limited⁵.

Figure 7: Beta Index of stocks of studied companies

Forecast: The ARIMA (Autoregressive Integrated Moving Average) technique is employed to predict the stock prices of the chosen pharmaceutical companies in the capital market. This research offers prospective models for each Indian pharmaceutical company under scrutiny. The projected stock prices for these companies span a 4-year timeframe, furnishing investors with crucial insights and empowering them to anticipate price fluctuations based on the developed model. Additionally, in Table 1, the analysis presents a 95% confidence interval for both the high and low stock price movements until July 2027.

Table 1: Analysis presents a 95% confidence interval for both the high and low stock price movements till July 2027

Stock	Low	High
Cipla Limited	411.2848	1654.015
Dr. Reddy Laboratories	2179.474	8176.630
Lupin Limited	-323.737383	2184.506
Torrent Limited	1764.586	3520.914

And by then it has 80% chance of reaching highs and lows (shown in Table 2).

Table 2: Analysis presents 80% confidence interval for both the high and low stock price movements till July 2027

Stock	Low	High
Cipla Limited	626.3612	1438.939
Dr. Reddy Laboratories	3217.387	7138.717
Lupin Limited	110.3582	1750.410
Torrent Limited	2068.549	3216.951

The predicted prices of studied stocks for 4 years (August, 2023 to July, 2027) are presented quarter-wise in the form of the tables and graphs.

Cipla limited:

Table 3: Predicted price of studied stocks for 4 years (August, 2023 to July, 2027) presented quarter-wise.

Point	Low 80%	High 80%	Low 95%	High 95%
Aug 2023	974.0073	1091.293	942.9637	1122.336
Dec 2023	901.5209	1163.779	832.1053	1233.195
Apr 2024	856.7218	1208.578	763.5910	1301.709
Aug 2024	821.2106	1244.089	709.2813	1356.019
Dec 2024	790.8598	1274.440	662.8638	1402.436
Apr 2025	763.9152	1301.385	621.6556	1443.644
Aug 2025	739.4363	1325.864	584.2183	1481.082
Dec 2025	716.8492	1348.451	549.6743	1515.626
Apr 2026	695.7731	1369.527	517.4412	1547.859
Aug 2026	675.9401	1389.360	487.1093	1578.191
Dec 2026	657.1532	1408.147	458.3773	1606.923
Apr 2027	639.2625	1426.038	431.0158	1634.284
Jul 2027	626.3612	1438.939	411.2848	1654.015

Figure 8: Forecasting of CIPLA LIMITED stock

Dr. Reddy's laboratories limited:

Table 4: Predicted price of studied stocks for 4 years (August, 2023 to July, 2027) presented quarter-wise.

Point	Low 80%	High 80%	Low 95%	High 95%
Aug 2023	4840.392	5511.486	4662.764	5689.113
Dec 2023	4525.466	5830.632	4180.010	6176.088
Apr 2024	4315.588	6040.516	3859.027	6497.077
Aug 2024	4147.601	6208.503	3602.113	6753.991
Dec 2024	4003.397	6352.707	3381.571	6974.533
Apr 2025	3875.055	6481.049	3185.290	7170.814
Aug 2025	3758.268	6597.836	3006.679	7349.425
Dec 2025	3650.383	6705.721	2841.684	7514.420
Apr 2026	3549.630	6806.474	2687.595	7668.509
Aug 2026	3454.757	6901.347	2542.500	7813.604
Dec 2026	3364.842	6991.262	2404.987	7951.117
Apr 2027	3279.180	7076.924	2273.977	8082.127
Jul 2027	3217.387	7138.717	2179.474	8176.630

Figure 9: Forecasting of Dr. Reddy's Laboratories Limited stock

Lupin limited:

Table 5: Predicted price of studied stocks for 4 years (August, 2023 to July, 2027) presented quarter-wise.

Point	Low 80%	High 80%	Low 95%	High 95%
Aug 2023	812.0238	1048.745	749.367460	1111.401
Dec 2023	665.7220	1195.047	525.618293	1335.150
Apr 2024	575.3026	1285.466	387.333703	1473.435
Aug 2024	503.6292	1357.139	277.718702	1583.050
Dec 2024	442.3712	1418.397	184.032629	1676.736
Apr 2025	387.9880	1472.781	100.860791	1759.908
Aug 2025	338.5815	1522.187	25.299947	1835.469
Dec 2025	292.9931	1567.776	-44.421384	1905.190
Apr 2026	250.4546	1610.314	-109.478459	1970.247
Aug 2026	210.4251	1650.344	-170.698347	2031.467
Dec 2026	172.5069	1688.262	-228.689223	2089.458
Apr 2027	136.3975	1724.371	-283.913797	2144.682
Jul 2027	110.3582	1750.410	-323.737383	2184.506

Figure 10: Forecasting of LUPIN LIMITED stock

Torrent Pharmaceuticals Limited:

Table 6: Predicted price of studied stocks for 4 years (August, 2023 to July, 2027) presented quarter-wise.

Point	Low 80%	High 80%	Low 95%	High 95%
Aug 2023	1874.504	2040.261	1830.630	2084.134
Dec 2023	1830.389	2201.034	1732.285	2299.138
Apr 2024	1825.404	2322.677	1693.784	2454.297
Aug 2024	1833.546	2431.193	1675.359	2589.381
Dec 2024	1848.981	2532.417	1668.087	2713.311
Apr 2025	1869.230	2628.826	1668.177	2829.879
Aug 2025	1892.964	2721.751	1673.597	2941.118
Dec 2025	1919.371	2812.002	1683.106	3048.267
Apr 2026	1947.914	2900.118	1695.880	3152.151
Aug 2026	1978.213	2986.476	1711.342	3253.347
Dec 2026	2009.991	3071.357 3	1729.065	3352.283
Apr 2027	2043.036	3154.970	1748.724	3449.282
Jul 2027	2068.549	3216.951	1764.586	3520.914

Figure 11: Forecasting of Torrent Pharmaceuticals Limited stock

CONCLUSION:

This study focuses on analysing the stock prices of pharmaceutical companies using statistical methods. Utilizing fundamental statistical methods such as box plots and histogram charts, the investigation provides valuable insights into the behaviour of stock prices over the research period. The results suggest that, with the exception of Dr. Reddy's Laboratories, the distribution of stock prices is non-normal. Among the four companies, Cipla's stock performance is identified as the weakest throughout the study period.

The positive money flow index (MFI) suggests a continuous influx of money into the capital market, providing valuable information for investors to make informed decisions about the stocks. Similarly, the beta index reveals that Dr. Reddy's stock exhibits the highest volatility, followed by Torrent, Lupin, and Cipla. Cipla's beta index value indicates a challenging position for the stock. Long-term investors can utilize the beta index to determine whether to hold, sell, or buy a share.

Furthermore, the study recommends that investors pay attention to stocks that present clear buy or sell signals, as indicated by the recovery from overbought or oversold conditions calculated from the stock's MFI. The predictions presented in Figures 8–11 serve as reliable guidance for investors in making stock-related decisions.

It is essential to note that this study has certain limitations due to the utilization of limited monthly data. As a result, the recommendations provided herein should be considered within these constraints.

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4. Sharma Rashmi Priya and Sharma Arabinda: Statistical Analysis of Stock Prices ofSelected Companies in Construction Industry.

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Received on 20.06.2024 Modified on 24.07.2024

Int. J. Rev. and Res. Social Sci. 2024; 12(3):146-155.

DOI: 10.52711/2454-2687.2024.00025