IndiGo shares give up half of Wednesday's gains after oil jump, HSBC target cut

Shares of InterGlobe Aviation Ltd., the parent company of IndiGo, opened 4% lower on Thursday, April 2, after the airline announced a revision in fuel surcharges effective the same day.

The revised fuel charge structure is now distance-based, making short-haul travel cheaper while increasing costs for medium and long-haul routes.

For domestic routes, fuel surcharges now range between ₹275 and ₹950, compared to a flat ₹450 earlier. On international routes, surcharges have been raised to ₹900-₹10,000 from ₹425-₹2,300 previously.

According to IATA's Jet Fuel Monitor, global jet fuel prices have surged more than 130% month-on-month, while aviation turbine fuel prices on international routes have risen 115% amid tensions in West Asia.

Domestic price increases, however, have been limited to around 8.5% due to government intervention.

IndiGo said it has only partially passed on the higher fuel costs to customers in a bid to support demand.

Meanwhile, HSBC cited major headwinds for the aviation sector, including elevated oil prices, a weakening Indian rupee against the United States dollar, and flight cancellations.

The brokerage said that the fuel surcharge hike is unlikely to fully offset margin pressures.

HSBC added that airlines may reduce capacity during the summer season to better align with demand, although underlying fares are expected to remain firm.

For InterGlobe Aviation, HSBC has maintained a 'Buy' rating but cut its price target to ₹5,210 from ₹5,860 earlier.

On Wednesday, IndiGo shares rallied 9%, which was the biggest single-day move for the stock since May 2022. The stock was also the top gainer on the Nifty 50 index.

Note To Readers

Disclaimer: The views and investment tips expressed by investment experts on CNBCTV18.com are their own and not that of the website or its management. CNBCTV18.com advises users to check with certified experts before taking any investment decisions.