SpiceJet Shares Surge as VAT Relief Hopes Revitalize Sentiment; IndiGo Reverses Losses

SpiceJet Shares Extend Rally Amid Reports of Potential Government Relief Measures

Shares of SpiceJet Ltd hit the upper circuit for the second consecutive session on Wednesday, continuing their sharp rally, as reports of potential government relief measures for airlines boosted sentiment in the sector.

The company's shares were locked in a 5 percent upper circuit at Rs 14.62 in afternoon trade, taking the stock's gains to approximately 50.1 percent so far in April. Despite the recent surge, the stock remains down about 70.6 percent over the past one year.

InterGlobe Aviation Ltd, which operates IndiGo, was marginally lower, trading at Rs 4,675.8, down 0.37 percent. However, the stock recovered from intraday lows and was up about 1.1 percent from the day's bottom, indicating some buying support at lower levels.

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The divergent stock movement comes amid reports that the government is considering additional measures to cushion airlines from the impact of the West Asia crisis, particularly on fuel costs. According to CNBC Awaaz, the Civil Aviation Ministry is in discussions with state governments to reduce value-added tax (VAT) on aviation turbine fuel (ATF), a key cost component for airlines.

The reports suggest two possible approaches are being considered. One is a time-bound reduction in VAT, potentially for three to six months, to provide temporary relief to airlines facing elevated fuel costs. The other is an airport-specific VAT cut, particularly targeting high-traffic hubs such as Delhi and Mumbai, where fuel consumption is highest.

Any reduction in ATF taxes could significantly ease cost pressures for airlines, especially for financially stressed carriers such as SpiceJet, where fuel expenses form a significant portion of operating costs.

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SpiceJet's recent rally has been sharp and momentum-driven, with the stock seeing multiple upper circuits over the past few sessions. The continued gains suggest that investors are positioning for potential long-term gains, even as the airline continues to face financial challenges and legal overhangs. On the other hand, IndiGo has shown relatively muted movement.