Will Indian Premier League (IPL) Impact The Market Capitalization Of Sensex?

The 5th season of the Indian Premier League (IPL) is scheduled to kick-off tomorrow. For a cricket crazy nation like India it’s that time of the year when you are completely surrounded by the DLF Maximums, Citi Moments of Success, the beautiful cheerleaders and all those bollywood-filmy razzmatazz.

Despite the current dismal state of Indian Cricket, which is much alike the fate of the Indian economy, one can expect an all-round turnout during the IPL matches. The usual belief is that stock market movements and volumes take a backseat during cricket time. However, given the immense domination and interests that corporate India has vested into cricket in recent times, we at DSIJ believe that there will be much to look out for from an equity markets point of view in the coming IPL edition.

Taking a look back into the history, the equity markets on a broad basis have not shown any significant correlation to the IPL seasons (1 to 4). 

If we look at the table above, the whooping 26 per cent returns generated by markets in April-May 2009 had more to do with the victory of UPA-II govt. in the general elections rather than the resultant shifting of the tournament to South Africa which Deccan Chargers led by Australian wicket keeper Adam Gilchrist had won. Last year’s negative 9 per cent returns too could be attributed to the high inflation high interest rate scenario.

However, as mentioned earlier in the write-up, corporate India’s vested interest in the IPL may become a reason for heavy movement in certain scrip’s listed on the bourses. For example, Deccan Chronicle Holding (DCHL) listed on BSE appreciated by 42 per cent in the year when its IPL team won the title. Scrip’s of India Cement too generated returns of 10 per cent in March-April 2010 when its team Chennai Super Kings led by Mahendra Singh Dhoni lifted the title. Below are the list of teams, its owners and sponsors. One must keep a close watch on the price movements of these scrip’s over the coming days as they are expected to witness heavy action as the IPL drama unfolds.

Investors must also keep close watch on other media scrip’s like TV-18 and Network-18 etc. as their viewership ratings and advertising revenues come under strain. This is despite the IPL having witnessed a gradual fall in TRP’s over the past two years. Scrip’s of movie distribution companies like Shree Ashtavinayak, Balaji Telefilms and Eros International may get impacted as they might postpone their movie release during the IPL. This would also affect movie exhibition players like PVR, Cinemax India and Reliance Mediaworks, however they may retort to screening of IPL matches and make up for the revenues. Lastly one must also not forget listed consumer durable players like Videocon and Merk Electronics.

In conclusion, keeping aside some major economic events like the upcoming RBI monetary policy review and the March quarter results season, there are many more events happening around us that would have an impact in markets too. We advise readers to keep a close watch on the above mentioned scrip’s as they are likely to witness heavy action over the coming few days. Ironically, given the current state of affairs in the economy the last thing to expect would be some unwarranted drama or scam which would have a negative implication on overall sentiments. It’s best to keep the fingers crossed, sit back and enjoy the IPL-5 season.