Despite a lackluster session at the Bombay Stock Exchange (BSE), shares of aviation companies — Kingfisher Airlines, Jet Airways and Spice Jet — jumped by more than 5% on Wednesday amid reports that foreign direct investment (FDI) might be allowed in Indian aviation companies.
Shares of Kingfisher Airlines jumped by Rs. 1.20, or 6.4%, to touch Rs. 19.85, while shares of Jet Airways increased by Rs. 17.9, or 5.3%, to reach Rs. 358.5 and shares of SpiceJet increased by Rs. 1.5, or 5.5%, to close at Rs. 29 on Wednesday.
Earlier on Tuesday, certain media reports said that the Cabinet could soon pass the proposal to allow FDI up to 49% in domestic carriers.
All aviation companies with an exception of one airline are losing money on account of high operational costs, mainly on fuel costs."If FDI is allowed in the domestic companies which are losing money, the whole perspective for the industry changes. There would be expansion plans for the companies and the money that they are losing on tickets due to low pricing could be controlled," said Sharan Lillaney, aviation analyst with Angel Broking.
Industry experts advice investors to enter the aviation stock, as the FDI would impact the company’s performance. “We have issued a buy call for SpiceJet,” added Lillaney.
The aviation sector witnessed the jump in stock prices amidst weak market sentiments. The Sensex on Wednesday more or less remained flat during the day but closed at 17,199 points, down 44.44 points, or 0.3%.
The aviation stocks were on the receiving end for the past few months. The Kingfisher stock touched its 52-week low on April 2 this year. While Jet Airways and Spice Jet stocks touched their 52-week lows on December 29 and December 22, last year.
India bans airlines submitting data
India has banned domestic airlines from submitting carbon emissions data and paying carbon tax to the European Union under the Emissions Trading Scheme (ETS).
The instructions have been issued by the aviation ministry. China has already barred its airlines from joining the EU scheme. Non-EU countries led by US, India and China have opposed the controversial EU tax that could lead to an increase in airfare by as much as $50-250 and cost domestic carriers billions of dollars in EU airspace emissions fees. India has termed the tax as unilateral and extra-territorial imposition by the EU.