IndiGo Turbulence: Short-Term Pain, Long-Term Strength
The aviation sector is battling structural issues that go beyond seasonal disruptions. “IndiGo is Indian aviation. So, we have to accept that,” Sabharwal asserted, highlighting its dominant 63% market share.
Crew shortages and regulatory constraints are expected to hurt near-term performance, especially during peak holiday travel. Still, he sees a buying opportunity emerging: “If it corrects another maybe 5-10%, it could be more of a buying opportunity… They will continue to dominate the skies.”
On the rupee’s impact—an estimated ₹900 crore EBITDA hit for every ₹1 depreciation—he clarified that the effect is largely accounting-driven due to long-term leases. “It is not a cash flow impact… everyone knew, so that was nothing new,” he noted, adding that operational disruptions are the real concern.
IndiGo’s numbers are likely to remain weak for a couple of quarters, though he expects stabilisation by early February.
Rupee Depreciation: “A Given,” Says Sabharwal
Addressing fears around the weakening rupee, Sabharwal argued that the anxiety may be overdone but not entirely misplaced.“See, what happens is that we have a huge trade deficit, like last month was $40 billion contributed to part by the US tariffs, otherwise on a run rate basis we are at a $20-25 billion trade deficit, so that has to be sustained by capital flows, NRI deposits, etc,” he explained.
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With capital flows in the negative and India lacking a reserve currency advantage, depreciation becomes almost inevitable. He added that the rupee is currently “catching up” after remaining unusually stable in 2023 and 2024.
According to him, “by the end of this year… from there I do not see too much of depreciation in 26.”
All Eyes on the U.S. Fed
While the RBI’s stance remains steady, global cues are dominating sentiment. Sabharwal pointed out the Fed’s tendency to align with market expectations.
“Right now the market expectation is… there was a 90% probability that there is going to be a 25 basis point cut. So, I guess that cut is going to come.”
A Fed cut, he said, would make a 25 bps move by the MPC logical, preserving interest rate differentials. If the Fed surprises by holding rates, he warned that “the reaction in crypto markets, AI related stocks, etc, could be brutal.”
ITC Hotels: Overhang Eases
As BAT exits ITC Hotels, investors are questioning whether the stock can find its next leg of growth. Sabharwal believes the worst of the overhang is behind.
“Valuations of hotels are not really cheap, but I do not think they will become cheap… this is a decent steady return stock,” he said, pegging it as a 15% CAGR opportunity over the next few years.
