Why Did PVR and Inox Share Prices Surge Despite Theater Closures?

Introduction

In the wake of theater closures due to the ongoing pandemic, many investors would naturally expect a dip in the stock prices of companies such as PVR and Inox Leisure. However, this was not the case, as these shares have seen a significant increase. This article explores the reasons behind this unexpected surge and discusses the role of investor sentiment and discounted pricing.

The Context of Theater Closures

The global pandemic led to theater closures in numerous countries, and India is no exception. With movie theaters shut down, it would seem logical for the stock prices of companies like PVR and Inox Leisure to decline as they primarily generate revenue through the exhibition of films. However, contrary to expectations, these stocks have experienced a remarkable rise.

The Role of Investor Sentiment

The surge in PVR and Inox share prices can be attributed to a number of factors, with one of the most significant being investor sentiment. As more and more people found themselves staying at home during the lockdowns, many turned to investing as a way to make use of their newfound free time. Source 1

In 2020, brokerage firms witnessed a surge in account openings, with a large number of individuals entering the equity market. This influx of new investors not only stepped up the demand for stocks but also led to a phenomenon known as 'lockdown investing.'

Discounted Pricing Attracts Buyers

Before the pandemic, the stock prices of these companies were relatively high, and as theaters began to close down, there was anticipation that these shares would drop. However, the brokerage firms offered these shares at a discount, which attracted investors looking to buy at a lower price with the expectation of making a profit when the theaters reopen.

For instance, on April 1, 2020, the PVR share price was around 985 INR, while as of January 20, 2021, it stands at 1556.80 INR. This represents a 58.22% increase, providing a substantial profit to those who invested during the initial phase.

Broader Market Tendencies

The theater closure scenario is not unique to these two companies. A generalized increase in the stock market during the pandemic can be partially attributed to risk-on sentiment. With traditional investment avenues becoming less attractive due to low-interest rates and economic uncertainties, many investors gravitated towards the equity market, aiming for capital appreciation. Source 2

Looking Forward

While the current high in stock prices may reflect the confidence of investors, there is a realistic possibility that profit booking could emerge, leading to a decline in share prices. This decline is more likely if theaters do not reopen in the near future. With the release of new films and movies gaining popularity, the share price might stabilize once again, providing a clearer picture of the market's reaction to the reopening of theaters.

Investors should stay updated on the latest news and market trends to navigate the rollercoaster of the equity market. While the surging share prices of PVR and Inox may seem inviting now, one needs to be prepared for any volatility as the situation evolves.

Conclusion

In conclusion, while the sudden surge in PVR and Inox share prices may seem counterintuitive given the closure of theaters, it is mainly driven by investor sentiment and the advantageous pricing they offered during the pandemic. As always, the volatile nature of the stock market should not be underestimated, and investors should remain vigilant and informed.

source1: New Individual and Institutional Investors Enter the Equity Market During COVID-19

source2: Coronavirus Impact on Market; Trading Volume Increase