Morgan Stanley also hiked the stock's target price to Rs 1,311 from Rs 790.
Shares of Interglobe Aviation, the operator of domestic airline IndiGo, rose nearly 5 percent after Morgan Stanley upgraded its rating on the stock to "Overweight" from "Equalweight".
Morgan Stanley also increased the stock's target price to Rs 1,311 from Rs 790.
The stock rose around 4.8 percent on the news to Rs 1,076.70.
"Competitive position has strengthened in recent downcycle," Morgan Stanley said in its research note.
The brokerage also said that there are signs of Interglobe Aviation's cost headwinds receding with rising yields.
"Attractive valuations; risk reward favourable," it said.At 10:35 IST, Interglobe Aviation was trading at Rs 1,063.70 on BSE, up 3.56 percent from its previous close.