Indigo stock may not soar on Sensex debut, but it will curb the crash, analysts say

Subscribe to enjoy similar stories. Shares of InterGlobe Aviation Ltd, which runs IndiGo, are unlikely to stage a major recovery once the stock joins the Sensex on 22 December as investors await clarity on regulatory overhang, but its inclusion in the benchmark index could provide downside protection, several analysts told Mint.

Indigo shares are down about 17% since the start of the month, after the airline cancelled more than 4,500 flights last week due to an acute crew shortage that resulted from its failure to adapt to new, stricter flight duty time limitations (FDTL) rules for pilots. Following this, the civil aviation regulator ordered India’s largest airline to cut its winter schedule by 10%.

The stock’s price-to-earnings ratio was 25.5 on 11 December, compared to 30.8 on 1 December and 32.7 on 20 August, when it hit a record high of ₹6155.50. However, five market analysts have said a further erosion of the share price was unlikely, even though the airline expects revenue to fall in the December quarter because of last week’s cancellations.

Inclusion in the Sensex typically increases demand for a stock as passive funds which track the index and other mutual funds look to include it in their portfolios, driving the share price higher. On 21 November, BSE Index Services, a Bombay Stock Exchange subsidiary, announced that InterGlobe Aviation would replace Tata Motors Passenger Vehicles Ltd in the 30-stock Sensex on 22 December.

While Indigo stock may not get a Sensex boost, its inclusion in the index should at least offer support on the downside, said Nirav Karkera, head of research at Fisdom, a wealth management firm based in Bengaluru. “Investors will still be cautious because the regulatory overhang isn’t gone.