As investors watch the corporate tussle for control of India’s largest-listed television network unfold, hopes for sector consolidation and economic reopening are turning the nation’s lagging media stocks into winners.

The 10-stock Nifty Media Index has jumped 46 per cent since the end of August, driven by an 81 per cent surge in heavyweight Zee Entertainment Enterprises Ltd — which got a non-binding offer from Sony Group’s Indian unit last month and has said it is open to other proposals. Zee’s rally has put the media gauge on track to beat the benchmark NSE Nifty 50 Index in annual gains for the first time since 2017.

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If a deal for the predominantly Hindi-language broadcaster goes ahead, India’s media sector, hit hard by the pandemic and competition from streaming giants like Netflix and Amazon.com, could be primed for more gains.

“Consolidation is inevitable. At some point media companies will have to think of merging with each other, since most of them are making losses,” said Kranthi Bathini, a strategist at Mumbai-based WealthMills Securities, adding that thin margins in the media space add to incentives for firms to merge with cash-flush buyers.

Reopening theatres

A potential Zee deal, however, isn’t the only catalyst. The media gauge’s recent gains have also been fuelled by cinema operators PVR and Inox Leisure — up about 23 per cent and 35 per cent over one month — as easing Covid-19 restrictions allow for reopening of theatres.

Further, broadcasters like Zee, Network 18 Media & Investments Ltd. and Sun TV Network Ltd. are seen benefiting as the start of India’s three-month long festive season boosts expectations for corporate spending on sales and advertising. Shares of Network 18 Media have soared almost 37 per cent over the past five sessions.

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