Brokers’ call: Sell aviation stocks, says JP Morgan

JP Morgan has advised investors to use the opportunity of the FDI rally in aviation sector to sell the aviation stocks. In a widely anticipated move, the Indian cabinet has approved 49% FDI in the aviation sector.

Details of the FDI policy are expected within a month. “We believe it is too early to assume that foreign airlines will pay a significant premium to invest, given fundamental headwinds,” said a report by JP Morgan.

As per Bloomberg, while few foreign operators (IAG and Lufthansa) have welcomed the FDI move, they are not considering investing in the near term.

According to JP Morgan, Spice-Jet is the most likely domestic player which could see a potential investment - it has a relatively stronger balance sheet compared to its listed peers and has potential to gain market share through fleet expansion.

JP Morgan has maintained their ‘Underweight’ rating on Jet Airways with Mar-13 target price of Rs245 while they have a ‘Neutral’ rating on SpriceJet with Mar-13 target price of Rs 28.