Tensions, turmoil and a ceasefire: Tourism stocks just dodged a Pakistan bullet. Should you buy?

The tourism and travel-related stocks in India recently faced a wave of uncertainty, driven by geopolitical tensions between India and Pakistan. Investors reacted swiftly, as disruptions such as flight cancellations, airspace restrictions, and even the suspension of high-profile events like the IPL weighed heavily on sentiment.

However, just when the market seemed poised for a prolonged slump, the news of a ceasefire between the two nations shifted the narrative. The question now is whether tourism stocks have truly dodged a bullet and if investors should consider accumulating them.

The initial shock: Market’s nervous reaction

When tensions flared between India and Pakistan, tourism stocks took an immediate hit. Aviation, hotels, and travel services companies saw a marked dip as travel plans were disrupted and cautious tourists postponed their journeys. Arpit Jain, Joint MD of Arihant Capital Markets, noted that the rising geopolitical tensions led to short-term volatility, with airport closures and event suspensions dampening demand.However, Jain remains optimistic that the impact would be regional and temporary, emphasizing that long-term trends remain intact.

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Similarly, Jinesh Joshi from PL Capital observed that while tourism stocks might remain out of favor in the near term, the situation is fluid and evolving.

He believes that investors should use this phase as an opportunity to accumulate quality names selectively, mentioning Indigo and Samhi Hotels as preferred picks due to their resilient business models.

Ceasefire changes the game

Now that a ceasefire has been announced, the market is reassessing its stance on tourism-related stocks. The initial panic seems to be giving way to cautious optimism. Robin Arya, Founder of GoalFi, believes that the underlying growth drivers of Indian tourism are far more resilient than short-term geopolitical noise.

He pointed out that domestic travel, cultural tourism, and government-led initiatives continue to sustain the industry. The broader tourism opportunity in India, driven by domestic consumption, remains robust despite transient disturbances.

“The long-term fundamentals of India’s travel and tourism sectors remain strong. Both hotels and airlines enjoy secular tailwinds – from rising disposable incomes to better infrastructure – and they have historically rebounded quickly from past disruptions,” said Krishna Apalla- Fund Manager, Capitalmind PMS.

Should you buy tourism stocks now?

The current market scenario presents a mixed bag. On one hand, geopolitical uncertainties could cause sporadic setbacks, but the ceasefire announcement has considerably reduced the perceived risk. Investors should not completely steer clear of tourism stocks but should rather adopt a selective, long-term approach.

Accumulating fundamentally strong names, particularly those with a strong domestic footprint, could prove rewarding. Stocks like Indian Hotels, Lemon Tree, and Indigo appear promising, as their revenue streams are less dependent on international tourism.

Moreover, companies focused on domestic travel, medical tourism, and religious tourism are well-positioned to weather the storm.

While tourism stocks took a hit amid the recent geopolitical scare, the ceasefire between India and Pakistan has significantly reduced immediate risks. Market experts suggest that long-term investors could use this dip as a buying opportunity. Rather than giving in to panic, focusing on resilient stocks with robust fundamentals and a strong domestic presence might be the way forward.

Top picks in tourism sector (Collated from different analysts)

Analysts believe the recent correction has created buying opportunities in select tourism stocks. Indian Hotels Company (IHCL), with its iconic Taj brand, is seen as a resilient play, benefiting from robust occupancy and strong brand recognition. Lemon Tree Hotels, focusing on the mid-market segment, is another favorite, with analysts citing its asset-light model and domestic travel focus.

InterGlobe Aviation (IndiGo), the market leader in aviation, remains a strong bet due to its extensive network and cost-efficient model, while Samhi Hotels offers a high-risk, high-reward play in the premium hospitality space.

EaseMyTrip, a leading online travel platform, also stands out for its asset-light approach and profitability, even during tough periods.

Analysts also favor IRCTC for its unique position in rail tourism and digital ticketing, which is largely insulated from geopolitical risks. For those seeking a luxury play, EIH Ltd (Oberoi Hotels) is recommended for its focus on premium properties, while Wonderla Holidays is seen as a niche leisure play, benefiting from a resurgence in family travel. The focus is on quality names with strong fundamentals and diversified revenue streams.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)

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