Shares of aviation stocks such as SpiceJet and Jet Airways surged up to 8 per cent in trade on Tuesday after the much-awaited IndiGo IPO received decent response on the first day of the launch and fetched Rs 832 crore from anchor investors on Monday.
The stock of SpiceJet ended 5.62 per cent after rising 8 per cent intraday to Rs 45.15, while Jet Airways settled at Rs 403.50 after rallying as much as 3.64 per cent to Rs 413, on the Bombay Stock Exchange (BSE).
The sentiment on aviation stocks turned positive as the qualified institutional buyers' (QIBs) portion in the IndiGo IPO was oversubscribed within 30 minutes of the issuance.
Data from the NSE website showed all the bids in the QIB category came in from foreign institutional investors (FIIs). Domestic financial institutions had not made any bids till the time of filing this report.
By 16:30, the QIB portion was subscribed by 2.79 times, while the retail was subscribed by 0.01 times.
FII response to the IPO shows foreign investors still believe aviation space will continue to remain profitable.
JetAirways is likely to report its quarterly earnings on October 28, 2015, followed by SpiceJet in November. Both the aviation firms are expected to report profits in the backdrop of falling crude prices.
Brent crude prices have been on a falling spree. Even as the commodity has made some attempt to bounce back, the upside has largely been capped due to supply glut amid subdued global economic environment. Declining global oil prices have made oil imports cheaper, resulting in price cut for the airlines. Air Turbine Fuel (ATF) constitutes more than 30 per cent of airlines' expenditure. The price reduction will ease the financial burden of cash-strapped carriers.