Why IndiGo is the Sensex’s worst newcomer since 2010

Subscribe to enjoy similar stories. MUMBAI : IndiGo’s parent, InterGlobe Aviation Ltd, has suffered a sharp sell-off due to the operational meltdown just days before its inclusion in the Sensex, becoming the worst-performing stock to enter the benchmark index in the last 15 years, based on one-month pre-inclusion returns. BSE Index Services announced on 21 November that InterGlobe Aviation would replace Tata Motors Passenger Vehicles on the prestigious 30-scrip index on 22 December.

This one-month period is a critical window, as the stock typically sees a reshuffle-driven rally as institutional and passive index-tracking funds realign their portfolios. Initially, the stock followed this trend, gaining 1% post announcement. However, the early December operational crisis erased those gains.

The airline's execution lapses during the transition to new flight duty time limitations (FDTL) triggered mass flight cancellations, sending the stock down 15.7% over the past month. Data shows that joining the Sensex is usually a tailwind for stock prices, with 69% of the last 29 entrants seeing a flat or upward trend. In fact, the median return leading up to inclusion is a healthy 3.2%.

While some gains peaked at 43%, IndiGo’s nearly 16% drop stands in stark contrast. That said, only nine out of the 29 stocks analyzed declined in the month prior to their inclusion, and only a handful approached this level of volatility. The only companies to come close to IndiGo’s poor showing were Jindal Steel, which fell 15.5% in 2010, and Vedanta, which dropped 14% in 2018.