Did Baahubali 2 Help Us Score Our Biggest Winner of 2017? - Views on News from Equitymaster

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The Equitymaster Research Digest

Did Baahubali 2 Help Us Score Our Biggest Winner of 2017?
May 8, 2017

  • Switch off the news, turn on the charts
  • Our biggest winner of 2017
  • Pillion riding with Baahubalis of Indian Stock Market

Baahubali 2 has shattered all box-office records. It has become the first Indian movie to collect more than Rs 1,000 crores revenue worldwide. The producers are generating good returns on their investment. But they are not alone. It may have helped us score our biggest winner of 2017. More on that later...

Financial media started focusing on theatre stocks just before the movie's premiere. As usual, they wanted to explain why theatre stocks rallied and the only reason they could find is the release of Baahubali. So, without much thought, they established a cause and effect relationship.

Their headlines went something like this: PVR, Mukta Arts Rally before Kattappa's Baahubali secret is out.

Now it's quite silly of them to establish a direct relationship between the two as if nothing else matters. Recently, we took movies that earned more than Rs 100 crore at the box office and calculated PVR's (leader in theatre industry) stock returns 21 days (shelf life of the movie) before and after release.

Fifty-three blockbusters have earned more than Rs 100 crore each since 2008. PVR's average return 21 days before a blockbuster release was 5% and 21 days after release was 4%. Now it may look like buying PVR near a major release is a good strategy...but don't forget the role of hindsight.

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