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Tourism, hospitality, airline stocks climb, shrug off Omicron worries

Hotel and tourism stocks jumped about 4-8 percent on November 30 despite concerns about the Omicron strain that has seen countries bring back travel restrictions

November 30, 2021 / 02:08 PM IST

After a week of battering, tourism and hospitality stocks unlocked a recovery on November 30, shrugging off concerns over the Omicron variant of the coronavirus that triggered worries about the global economy.

Stocks such as Lemon Tree HotelsEIH AssociatedThe Byke HospitalityIndian Hotels and Chalet Hotels  jumped between 4 and 8 percent in the trade, with market participants seeing the correction triggered by worried over the new strain as overdone.

Even airline and travel stocks such as InterGlobe, the IndiGo operator, SpiceJet and Thomas Cook saw leisurely trade. At 11 am, they were trading 2-6 percent higher on the National Stock Exchange.

"Reopening stocks that include travel and hotel stocks typically react well to news that negate the threat of pandemic returning. Going by current news flow, it seems that the Omicron fears have been overblown, as of now, and hence as a relief reaction these stocks have bounced up well in trading on November 30,” said Deepak Jasani, Head of Retail, HDFC Securities.

Check out all the live market action here

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The sharp rebound came amid a broad-based recovery on Dalal Street. At 11.05 am, the Nifty 50 was up 0.7 percent at 17,169.45 points, off the day’s high of 17,324.65 points. The Sensex was also up 0.6 percent at 57,592.78 points, off the day’s high of 58,183.77 points.

On November 26, airline and hotel stocks had fallen 3-6 percent after the World Health Organization flagged the Omicron as a “variant of concern” because of its several mutations.

Market participants feared another lockdown across the world would hit travel stocks the hardest, as it did during the first wave of the pandemic.

Most of these companies have still not recovered from the losses during the lockdowns in both the first and second waves of COVID-19 in the country.

Also read: Air travel in India is on the cusp of normalcy; will Omicron change that?

The threat to these sectors still remains. Maharashtra Tourism and Environment Minister Aditya Thackeray on November 29, said around 1,000 travellers from South Africa had landed in Mumbai since November 10.

Delhi Chief Minister Arvind Kejriwal on November 30 questioned Prime Minister Narendra Modi on the delay in stopping flights from countries affected by Omicron.

“Several countries have stopped flights from Omicron affected countries. Why are we delaying it? We had delayed stopping international flights in the first wave also. Majority of flights land in Delhi. Delhi is most affected. Kindly stop the flights immediately,” he tweeted in Hindi.

Also read: Omicron fear brushed aside, share market rebounds. Four factors behind revival

On November 27, the Prime Minister highlighted the need for monitoring all international arrivals, their testing as per guidelines, with a specific focus on countries identified “at risk”.

So, what should investors in this space do?

"From the March 2020 lows, these stocks have risen quite well in anticipation of normalcy returning to the space. Hence, fresh positions need to be taken very selectively and only on dips," Jasani said.

Also read: Omicron COVID-19 Variant: Know the 5 key symptoms

Ventura Securities' Head of Research Vinit Bolinjkar expects downward pressure to continue due to a combination of factors like inflation, low earnings upgrades and high FII selling.

However, he is upbeat on airline stocks for the long term. "Video-conferencing can hamper the initial passenger numbers but post that, we expect the growth trajectory to return due to low passenger penetration in India and a growing number of domestic airports," Bolinjkar said.

"Given the uncertainty, there could be some near term challenges to the travel and leisure segment. Thereby, they could possibly see volatility depending upon the news flow with respect to the new COVID variant," said Arun Agarwal, Deputy Vice President - Fundamental Research, Kotak Securities. He is positive on Interglobe Aviation for the long term.

Jasani said the aviation sector may see heightened competition due to Air India privatisation and entry of new players. "Even otherwise, the sector is known for bringing poor returns for investors due to its capex intensity, seasonality, high fuel costs and dependence on normal times," he said.
Patricia Hou
first published: Nov 30, 2021 12:21 pm

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