The BSE Sensex fell yesterday by over 1,600 points, which was nearly a 6% fall; the largest single-day fall and the fourth largest crash of the stock market in terms of absolute value. The Sensex by the end of the day stood at 25,741.56 points, falling below the 26,000 mark. This is the biggest crash of the stock market in over seven years and it was only in 2008 that the Sensex had crashed over 1,200 points but at that time it was over three separate trading days. The listed media companies too were hit by the crashing of the market and saw a market cap decline of almost Rs.12,000 crore.
Reasons for the stock market crash
The reason for this crash is mainly due to the larger macro-economic conditions the world over and mostly due to the trouble in the Chinese markets. The Shanghai market shares had plummeted nearly 9% on Monday and were the single biggest loss since 2007. The reason for the markets tanking out is the devaluation of Yuan which had resulted raising concerns about the state of the Chinese economy. The falling of the Chinese markets has triggered large scale selling of foreign investors in the Asian markets, including India.
The devaluation of the Yuan has also led to the weakening of the Rupee which dropped by over 4% since August 2011 from Rs.66.65 per dollar to Rs.64. It has not seen such a low level in almost two years. This has further triggered selling in the Indian markets by foreign investors as they look to cut their losses due to the value of the rupee sinking. Foreign investors had sold shares worth Rs.8,500 crore in the last three trading session in a build-up to Monday’s landslide. The Reserve Bank of India (RBI) Governor Raghuram Rajan has said that India is one of the better off countries than others in the emerging markets and promised the Central Bank would intervene by not hesitating to use reserves to reduce the volatility in currency.
Media companies stocks take a big hit
The total loss to investor wealth, which was measured in terms of cumulative market value of all listed stocks, plummeted by nearly Rs.7 lakh crore. While this was the overall damage to all companies, the media sector companies also saw huge losses in their stocks. The listed media companies saw a market cap (market capitalisation) erosion of an estimated total of Rs.11,823.31 crore in the BSE Sensex from its closing on Friday to Monday closing. Market cap is calculated by the total number of shares of the company multiplied by the stock price at the end of the day’s trading. The highest market cap erosion was seen by NDTV followed by ZEEL and Sun TV Network. NDTV saw its market cap erode by Rs.6256.93 crore, ZEEL’s market cap eroded by Rs.2,246.44 crore and Sun TV Network by Rs.1548.74 crore. ZMCL’s market cap dropped by Rs.112.98 crore, TV18 dropped by Rs.454.3 crore, Network18 by Rs.507.77 crore, TV Today Network by Rs.182.82 crore, HT Media by Rs.50.04 crore, DB Corp by Rs.95.43 crore, Jagran Prakashan by Rs. 122.79 crore and ENIL (TOI) by Rs.244.07 crore.
By the end of the day ZEEL’s stock fell by 6.11% and was down 23.40 points to stand at Rs.359.65. ZMCL was down 11.74% and fell by 2.40 points to stand at Rs.18.05. Network18’s stocks were down 8.78% with a loss of 4.85 points and stood at Rs.50.40. TV18’s shares too were in the red will a loss of 2.65 points and down 7.82% to stand at Rs.31.25. Sun TV Network took a large hit to as it fell by 11.63%, down 39.30 points to Rs.298.50. NDTV’s stocks were down 16.27% with a loss of 17.20 points to stand at Rs.88.50. TV Today Network too saw a large decline of 31.25 points, down 13.99% to stand at Rs.192.15.
Among the print and radio players, HT Media saw a decline of 2.84% with a loss of 2.45 points to stand at Rs.83.85. D B Corp (Dainik Bhaskar) was down by 7 points, a fall of 2.19% and stood at Rs.312.85. Jagran Prakashan (Jagran Group) saw a fall of 5.20%, a loss of 7.15 points and stood at Rs.130.35. ENIL (Times Group) saw a fall of 7.33% which was a loss of 49 points and stood at Rs.619.80.
These drops in the stocks of these public listed media companies suggest huge losses suffered by these companies. The drop in the rupee would also mean huge losses in the overseas revenues for companies which have operations overseas. It would also take the overseas content acquisition costs of the companies higher. The volatility in the economy could also reduce the spends of advertisers, adding more pressure to media companies and ad and media agencies alike. It remains to be seen how fast the Indian market can recover from this drop.