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Media shares flop after Bharat Shah's arrest

NetScribes/Rajiv Banerjee

Media stocks continue to plunge on panic selling fueled by news of Bollywood producer and diamond merchant Bharat Shah's arrest. Most media scrips have hit the lower circuit on Monday and Tuesday. It is believed that Shah has been a financier to top stockbrokers in the country too.

Analysts tracking the sector say the downturn will continue for the next 7-10 days and media scrips will bounce back only after that. However, as media scrips continue to lose value, analysts recommend an entry at the prevailing lower levels.

Specific scrips like Mukta Arts have come under scrutiny as Bharat Shah is a director on the Mukta Arts board. There is a market perception that the company's business operations could be impacted following Shah's arrest.

"There is tremendous confusion in the markets and therefore there is negative perception relating to Mukta Arts. Therefore, it is advisable for investors to wait for the dust to settle and then take decisions," said an analyst with Pranav Securities, a leading BSE broking firm.

Media stocks continued to dip on Tuesday, most of them at the lower circuit filter. Mukta Arts closed at Rs 227.85, down Rs 19.80 from its previous close. TV18 has hit a new 52-week low of Rs 219.10, while Balaji Telefilms shed Rs 25.25 (7.98 per cent) and is currently trading lower at Rs 287.35. The Cinevista stock dipped 3.83 per cent on Tuesday, trading at Rs 133.25 against a previous level of Rs 138.95 on the Bombay Stock Exchange (BSE).

Analysts feel that the panic selling is a result of the herd mentality prevailing in the stock market and the outlook for scrips such as Mukta Arts, Padmalaya, TV 18 are good over the long term. "While the fundamentals for these media stocks are strong, over the short term there will be a downturn. Scrips such as Padmalaya Telefilms, Balaji Telefilms and Mukta Arts could still appear as good investments in the long term," said an analyst with Asit C Mehta Brokerage.

The feeling in the market is that since most of the listed companies are television companies, the selling pressure will be contained in a week or two. The consensus is that this is the right time for investors to put their money in media scrips and reap benefits over the long term.

"Mukta Arts is a good buy in the long term. While there are concerns, one should not be too perturbed by Bharat Shah's involvement in Mukta Arts as he is a non-executive director holding about 10,000-11,000 shares," said Shubabrata Majumdar, media analyst with Motilal Oswal Securities.

"The prices of scrips like Balaji Telefilms have skyrocketed and a correction was overdue. This arrest news triggered the correction and if the scrip falls a further 10 per cent, it will be a good investment," said an analyst with HSBC Securities.

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