Should you buy stocks of SUN TV and SpiceJet on plunge

Dayanidhi Maran, the latest unearthed participant (as alleged) of 2G spectrum scam is touted to be the beneficiary thru SUN TV when he was telecom minster. As result of these allegations of his involvement, SUN TV and Spice Jet stocks have crashed by 28% and 16% in a single day. Should you consider this as an opportunity to buy stocks of these companies and wait for the turmoil to get over for appreciation in stock prices?

Sun TV operates 20 TV channels with reach of over 95 million houses. Its stock price crashed by 27.9% to Rs 272.10. The SpiceJet stock price fell by 16.06% to Rs 34.50 on the Bombay Stock Exchange (BSE) in days time.

SUN TV is owned by Kalanithi Maran who is elder brother of Dayanidhi Maran. The allegations are that, a company Maxis, invested Rs 600 crores in SUN TV when Dayanidhi maran was telecom minister. In lieu of this, Dayanidhi Maran gave a telecom license to Aircel, a cellular phone service, for 14 telecom circles in India. Later, Maran also influenced Aircel promoter to sell the company to Maxis.

SUN TV stock crashed in markets after these revelations. The channel revenues thru advertising are on continuous growth path as per CFO of the company and this turmoil may not affect the company in long term as per him. Some one in stock markets has played the stock on negative sentiments and made money is the guess by SUN TV CFO looking at the delivery % of stock in BSE which was nearly 20%.

What, as a common investor, should we be doing now? Is this an opportunity to buy stocks of this troubled company which seems to be crashed on negative sentiments. SUN TV was enjoying the status of biggest media company in Indian stock markets by market capital. Now, with 28% fall, it is on second position behind Zee entertainment.

I believe, with no hurry, we should watch the counter carefully for some time and see how the main story behind this crash develops. It will take long time for this stock to make an upward movement again looking at the political conditions involved around it. Same is for Spice Jet. Wait and watch, look for directional cues in near future and then only invest in stocks of these companies if you are convinced that this turmoil will not sink the companies to the levels from where they cannot make a comeback. I will post my views on these two stocks in near future again if I feel we can make money by investing in them.