Election fever catching up with media stocks

By D K Aggarwal

Media plays an important role in helping political parties interact with voters and most of the parties are now using the print media, television, radio and other social networks like Facebook, Twitter and WhatsApp to convey their messages to their prospective voters.
It is true that this would translate into huge revenue growth for the media industry at large. Also, it is expected that the formation of a stable government at the Centre post-election would result in a series of reforms to boost the economy and this would further enhance the revenue growth prospects of the industry.

However, the sluggish economic growth and a decrease in consumer spending have strained advertisers, leading them to cut promotional budgets. This has adversely affected the media industry.

As the election is around the corner, media stocks have become attractive to investors and some of the media stocks have witnessed smart gains since the Election Commission (EC) announced the schedule for the general election on March 5, 2014.

As India goes to polls on April 7, the industry is expected to gain substantially on the back of a pick-up in advertising revenue, primarily in print and television, as viewership of news channels and readership of newspapers increase.

Also, the fast moving consumer goods ( FMCG) companies are raising their advertising expenditure, which is expected to further boost the performance of the media companies.

Almost 75 per cent of television advertising is concentrated over just three categories -- FMCG, telecom and auto -- while FMCG continues to dominate television advertising.

The television sector continues to grow on the back of better subscriber growth, linked to increasing digitisation.

Notably, about two years ago the digitisation of cable TV was started in India and the implementation of both its phases was delayed by about two-three months. The real benefit of digitisation is yet to be seen as phases I and II of the digitisation process are only the starting point for introducing set-top boxes in homes.

In the media industry one may choose to invest in stocks like Zee Entertainment, Jagran Prakashan, HT Media and Den Networks and Entertainment Network (India). All these companies have strong fundamentals and are attractively priced.

(The author is CMD, SMC Investments and Advisors limited. The views and recommendations expressed in this section are his own and do not represent those of EconomicTimes.com)