DIVIDEND POLICY AND MARKET VALUATION DYNAMICS IN INDIA’S AUTOMOBILE INDUSTRY: AN EMPIRICAL ANALYSIS

Abstract

Automobile sector’s stocks provide better opportunities for investors to participate in the industry's progressive growth and generate wealth in the long run. By purchasing the shares of the companies that are a part of the automobile sectors, the investors become partial owners of that company and can benefit from the appreciation of capital, when the stock price increase over time. Since sector is dynamic, the stocks of the auto sector are influenced by a myriad of factors, which include economic conditions, government regulations, customer preferences, advanced technology, profitability, and performance of the various automobile industries. All these factors are taken into consideration for the price of the company's stock. Dividends can influence and determines the market price of stock in different ways. The regularity and trends in payment of dividend in the past records of an corporate entity has plays a crucial role in determining the market price and the declaration and payment of dividends also have a specific and predictable effect on market prices. This paper attempts to diagnose the relationship between dividend policy and stock price behaviour in Indian automobile sector. A sample of 10 listed companies from National Stock Exchange (NSE) and Bombay Stock Exchange (BSE). were analyzed for the years 2020-2024.The study has covered secondary data and analyzed the data by employing descriptive statistics, correlation and multiple regression models. It has tested hypothesis by using F test. The study has found that the the dividend pay-out is directly influence the market price positively than dividend retention. Finally, the paper concludes that the effect of dividend policy on market price supports the relevant theory of dividend policy i.e. Walter’s model and Gordon’s model.