IndiGo, Spicejet and other airline share prices surged up to 5 per cent on BSE on Tuesday, a day after the Ministry of Civil Aviation raised the flight capacity allowance to 65 per cent.
IndiGo, Spicejet and other airline share prices surged up to 5 per cent on BSE on Tuesday, a day after the Ministry of Civil Aviation raised the flight capacity allowance to 65 per cent. Analysts say even though the aviation ministry increased flight capacity to 65 per cent, rising fuel prices, slack monsoon period and fear of an impending third Covid-19 wave could dampen the upward momentum for airline stocks. Barring Jet Airways share price, which hit a 5 per cent lower circuit at Rs 108.45 apiece, all the airline stocks were trading in green.
InterGlobe Aviation shares surged 3 per cent, Spiecejet nearly 4 per cent, Global Vectra Helicorp 5 per cent and TAAL Enterprises 4.3 per cent. In comparison, BSE Sensex was up 78 points at 52,958 levels. The Civil Aviation ministry in its tweet said considering the increasing passengers’ demand for domestic air travel, the capacity of domestic civil aviation operations will be increased to 65 per cent from 50 per cent from the date of issue of this order and upto 31.07.2021 or until further orders. “Technically, IndiGo share price faces strong resistance at Rs 1,813. Similarly, SpiceJet faces strong resistance at Rs 84. Close above these levels only could trigger a strong up move,” AR Ramachandran, Co-founder & Trainer, Tips2Trades, told Financial Express Online.
The airline stocks have witnessed a rebound with partial resumption of travel and amid mass vaccination drive. The recent increase in flight capacity from 50% to 65% may further add some tailwind, said an analyst. “However, it’s an industry we would like to avoid considering a potential third wave. Not to mention that barring Interglobe Aviation, there was no comfort on the fundamentals front in aviation stocks in the pre-pandemic period. The stock of Interglobe Aviation is close to its lifetime high, touched in the year 2019, offering no valuation comfort,” Richa Agarwal, Senior Research Analyst, Equitymaster, told Financial Express Online.
Carriers have been operating with only 50 per cent of their pre-COVID domestic flights since June 1 in accordance with a May 28 order of the ministry. The May 28 decision to bring down the cap from 80 to 50 per cent was taken on the back of a sudden surge in the number of active COVID-19 cases across the country, decrease in passenger traffic and the passenger load (occupancy rate) factor.
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