IndiGo shares rise for 3rd consecutive session: What's behind rally?
What's the story
InterGlobe Aviation, the parent company of IndiGo, has witnessed a surge in its share price for the third consecutive session on Monday. The rise comes as signs of operational stabilization are seen after days of disruption. On the National Stock Exchange (NSE), the stock closed 2% higher at ₹4,960 per share. Over three trading sessions, it has gained nearly 3%. During today's trading session, it hit an intraday high of ₹5,014—a gain of 3.16%.
Operational challenges
IndiGo under scrutiny for flight cancelations
IndiGo has been in the spotlight from both the government and passengers over hundreds of canceled flights. The airline attributed these cancellations to new flight duty time limitation (FDTL) norms for pilots. Despite these challenges, HSBC has maintained a 'Buy' rating on the stock, saying IndiGo's long-term structural growth story remains intact. However, it did lower its target price to ₹5,977 per share—an upside of over 20% from today's close.
Market outlook
HSBC flags near-term headwinds for IndiGo
HSBC has flagged near-term headwinds from mass cancelations, tighter FDTL norms, and reputational impact. However, it also noted that IndiGo's cost leadership and limited peer capacity growth indicate no structural damage to the business. The brokerage estimates staff costs could rise by nearly ₹45 crore due to the new rules. It expects some temporary reputational impact in international markets but believes it will be short-lived.
Analyst recommendations
UBS and Jefferies maintain 'Buy' rating on IndiGo shares
UBS has also maintained a 'Buy' call but lowered its target price to ₹6,350 per share due to inadequate preparedness for the revised FDTL norms. Jefferies has retained its 'Buy' rating with a target price of ₹7,025 per share. The brokerage said IndiGo has been among the most affected by these new rules which reduce pilot duty hours and increase crew requirements.