Ahmedabad Air India Plane Crash: Shares of domestic airline companies, hotels and other travel industry companies continued to decline on June 13 in the aftermath of the Air India plane crash which took place in Ahmedabad on June 13. The Nifty India Tourism Index tracks the performance of stocks which are constituents of the the Nifty 500 Index and represent the travel and tourism theme.
Amid the declines in these stocks, the index has extended its losing streak for the fourth straight session and has fallen over six per cent to trade at a low of 8695.9 on June 13. Notably, the decline seen in the index comes amid a broadbased decline as headline indices extended losses on June 13. The Sensex fell over 1 per cent to trade at an intraday low of 80,354.59 and the Nifty fell x per cent to trade at an intraday low of 24,473.
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On June 12 at least 265 people lost their lives when a London-bound Air India flight crashed shortly after take-off. The plane which crashed in Ahmedabad on the afternoon of June 12 was a Boeing 787-8 Dreamliner. The plane crashed into the hostel of a medical college and sparked a massive blaze. Typically such incidents incite a rise in fear among travellers. As travellers change their plans, the businesses of travel and tourism-related companies get hit. This in turn typically leads to the market selling travel and tourism stocks.
Arun Agarwal, VP-Fundamental Research, Kotak Securities told Outlook Money that apart from the fears around air-travel a surge in crude oil prices has also contributed to the decline seen in airline stocks.
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“Crude oil prices have seen a sharp rise in recent days amid the geo-political developments. Fuel is big cost component for the airline players and if the oil prices sustains at the higher level, it can impact profitability. Accordingly, the airline stocks seems to be primarily reacting to the rise in oil prices,” Agarwal said.
Indian Hotels, Interglobe Aviation And GMR Airports Drag Index Down
Shares of airline stocks declined the most following the plane crash which took place on June 13. The shares of Interglobe Aviation which is the biggest constituent of the Nifty Tourism index fell over 5 per cent to trade at an intraday low of Rs 5176 apiece on the NSE. At the time of writing Indigo shares traded lower by 4.69 per cent at Rs 5176 apiece on the NSE. Other major constituents of the index such as Indian Hotels also fell over 2 per cent to trade at a low of Rs 726.95 apiece. Shares of GMR Airports also declined to an intraday low of Rs 79.92 apiece at the day’s low down by 2.42 per cent.
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Other constituents of the index which are from the travel and tourism sector such as Chalet Hotels and EIH Ltd also traded lower by up to 1.23 per cent. Shares of tours and travel-related services provider TBO Tek Ltd also came under pressure as they traded lower by 0.51 per cent at Rs 1,289.5 apiece on the NSE.
SpiceJet Share Price Declines
Shares of the BSE listed SpiceJet also extended losses for the second straight day in the aftermath of the tragedy falling over 7 per cent to Rs 42.42 apiece. At the time of writing shares of Spicejet traded lower by 1.75 per cent at Rs 43.9 apiece on the BSE. Shares of Spicejet have declined over 3.85 per cent in a month. On a year-to-date basis the airline’s stock has slipped 22.01 per cent and in a year shares of the airline company have fallen over 20.38 per cent.
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Agarwal also added that the impact of the air-crash is expected to be short-term in nature on travel and tourism relates stocks. However airline stocks are expected to come under pressure from the rise in oil prices.
“We do not expect long-term repercussion of this incident on the travel and tourism segment. If at all there is any impact (like uptick in cancellation), that would be limited to the near term. Airline sector have growth potential over the longer term. However, in the immediate future, the stocks in the aviation sector will likely react to the oil price volatility,” Agarwal said.
