IndiGo, SpiceJet, GMR Airports, other aviation shares tumble; here's why

Shares of select aviation-related companies declined sharply in Monday's trading session as a spike in global crude oil prices weighed on investor sentiment.

InterGlobe Aviation Ltd, the parent company of IndiGo, and SpiceJet Ltd were among the major laggards in the sector. At last check, IndiGo, which holds the largest market share in the domestic aviation market, was trading 7.57 per cent lower at Rs 4,071.35, while SpiceJet fell 5.29 per cent to Rs 13.26 in early trade.

Other key players in the aviation ecosystem also traded in the red. GMR Airports Ltd slipped 3.89 per cent, Dreamfolks Services declined 3.74 per cent and TAAL Tech Ltd dropped 1.33 per cent.

The weakness in aviation stocks came as crude oil prices surged sharply. Oil prices jumped more than 26 per cent on Monday as the conflict in West Asia continued to disrupt supplies. The US-Israel-Iran war prompted major producers such as Iraq and Kuwait to cut output. Concerns over the security of the Strait of Hormuz further added to price volatility. Brent crude surged $24.39 or 26.31 per cent to $117.08 a barrel.

"As global crude oil prices are approaching $120 per barrel, it would be negative for oil marketing companies as well as the aviation companies. It is going to create pressure on their margins and aviation stocks may remain under pressure in the medium- to short-term as long as the oil prices stay at elevated levels," stated Kranthi Bathini, Equity Strategist at WealthMills Securities.

Meanwhile, Indian equity benchmarks plunged in initial trade today, dragged lower by weakness across sectors amid the ongoing conflict involving Iran, the United States and Israel.

The primary trigger for the market weakness was the intensifying conflict in West Asia, which led to a sharp spike in global oil prices, said Ajit Mishra, SVP (Research) at Religare Broking.