The stock declined as much as 4.42 percent to Rs. 103.52 apiece, reversing the gains seen in the previous trading session after the report surfaced.
At around 10 am, the scrip was trading about 2.5 percent lower.
Following market hours on July 1, Zee Entertainment issued a clarification stating that it had no knowledge of the basis of the media report.
The company said no such investment was made during the period referred to in the report, effectively dismissing the claims of the purported FDI inflow.