Hotel stocks rise on new visa norms

Taj GVK, Hotel Leela, EIH rises over 2%

Hotel stocks such as Taj GVK, Hotel Leela and Viceroy Hotels gained between 2-10% in early morning trades on sales optimism after government relaxed norms on tourist visas which had mandated a two-month gap between consecutive visits by overseas nationals.

"Visa relaxation is the biggest boost for hotel companies which were dying a slow death on account of lower tourist arrivals," said Harish Vasudevan, strategist, SVS Securities Ltd.

India’s foreign tourist arrivals for October 2012 saw a sluggish growth of 2.8% with 560,000 foreign tourists coming here. The growth rate in foreign exchange earnings for October 2012 also dipped to 8% compared to an increase of over 21% in October 2011.

Industry experts  are  now hoping that lifting of the 60-day restriction will promote foreign tourists to visit India and use it as a hub while visiting neighboring countries.

Adding to the optimism was pick up in domestic hotel business after country's second-quarter growth expanded at 5.3%, meeting analysts estimates.

"GDP and hotel business has direct correlation as once growth gains momentum, we see rise in business activities, revival of companies capex cycle and therefore greater demand for luxury hotels for conducting seminars and conferences," said Vasudevan.

Morgan Stanley on Monday raised India’s growth forecast for the current financial year to 5.4 per cent from 5.1 per cent projected earlier, citing better than expected gross domestic product ( GDP) growth in the September quarter and stabilization in non-agriculture growth indicators.

"Hotel stocks move in the fourth quarter of every calendar year due to seasonality factor; bullish bet are increasing in general but our advise would be to take profits as euphoria sets in," said Shashank Mehta, derivatives strategist, Shah Investor's Home.

However, the recent visa relaxation norms coupled with growth optimism may see demand for luxury hotels in the New Year.