Trade aviation stocks with caution, avoid overenthusiasm: Deepak Shenoy

In a chat with ET Now, Deepak Shenoy, Founder, Capital Mind, shares his view on aviation.

ET Now: Gone are those days where aviation stocks were the hated ones. Given what has happened to the crude oil and how the dynamics of the Indian airline sector are changing, do you think aviation stock should be on everyone’s must buy list for 2016 as well?

Deepak Shenoy: I, think one or two of them would, IndiGo and SpiceJet become really attractive buys because – a) they are not supremely overvalued and b) I have not yet started to see the signs of a price war you typically see when costs are coming down.

The companies launched a price war of sorts. This time things have been a little low key. We have not seen GoAir come off with huge offers or Jet Airways or for that matter Air India so maybe this is a benign period for them and they are going to keep it that way as much as they can.

This industry itself is not really built to make profits for the long-term. So, any positions one take should be considered as a short to medium-term play, you are talking one or two years of severe outperformance and then some really bad things happen. Everybody loves to get into the sector and lose money and that hurts even the good incumbents at some point.

So while these are great consumption plays and these are definitely on our radar for 2016 too, I believe one should trade with a little bit of caution and not get over enthusiastic about the long term prospects here.