Two reasons why IndiGo stock was cut to 'Reduce' at JM Financial

JM Financial cut the IndiGo stock rating to 'Reduce' from 'Hold' with a target price of ₹5,570 per share, a downside of 2.8 per cent from Friday's close

JM Financial downgraded the stock of InterGlobe Aviation (IndiGo) stock to 'Reduce', citing that an increased fuel cost and weak rupee are expected to "adversely" impact its second-quarter earnings. 

 

The brokerage cut the rating to 'Reduce' from 'Hold' with a target price of ₹5,570 per share, a downside of 2.8 per cent from Friday's close. Indigo Airlines is expected to report a muted second-quarter performance, driven by higher aviation turbine fuel (ATF) prices, a weaker rupee, and a seasonally subdued period, JM Financial said. 

 

Total available seat kilometres (ASK) for Indigo grew 9 per cent and 6 per cent year-on-year (Y-o-Y) in July and August 2025, respectively, outperforming the overall industry growth of 1 per cent each month. The airline’s overall ASK growth for the quarter is projected at 8 per cent, in line with management guidance, while passenger yield (PRASK) is expected to remain flat Y-o-Y, JM Financial said.

 

ATF prices rose to ₹90,900 per kiloliter in the second quarter from ₹86,000 per kiloliter in the June quarter, up 5.7 per cent quarter-on-quarter (Q-o-Q), driven by higher crude oil costs. Profit before tax per ASK is estimated at negative ₹0.65, implying a net loss of ₹2,680 crore.

 

Indigo’s domestic market share fell 100 basis points month-on-month to 64.2 per cent in August, while international share rose 56 basis points to 27.4 per cent, JM Financial said. Despite short-term challenges, the airline remains focused on capacity expansion, and analysts maintain a constructive long-term view. 

 

Earnings estimates have been revised down by 14 per cent, 11 per cent, and 1 per cent for near-term quarters, reflecting a weaker rupee, though cost pressures are expected to be passed on to passengers over time. 

 

Given its dominant market position and strong execution, the stock's price-to-earnings multiple is pegged at a long-term average of 20 times (x), though recent gains imply potential near-term downside.  ALSO READ | Tata Capital share debuts flat on D-street; should you buy, sell or hold?

IndiGo Q1FY26 results

In the June quarter, InterGlobe Aviation reported a 20.25 per cent Y-o-Y decline in consolidated net profit to ₹2,176.3 crore, down from ₹2,728.8 crore reported in Q1FY25.

 

The company’s revenue from operations stood at ₹20,496.3 crore in Q1FY26, up 4.73 per cent Y-o-Y from ₹19,570.7 crore. On the flip side, total expenses in Q1FY26 rose 10.2 per cent Y-o-Y to ₹19,231.9 crore, up from ₹17,444.9 crore.

IndiGo's share price history

The airline's stock rose as much as 1.56 per cent during the day to ₹5,824 per share. The stock pared gains to trade 0.7 per cent higher at ₹5,778 apiece, compared to a 0.37 per cent decline in Nifty 50 as of 10:18 AM. 

 

Shares of the company rose for the third straight session. The counter has risen 26 per cent this year, compared to a 6.5 per cent advance in the benchmark Nifty 50. IndiGo has a total market capitalisation of ₹2.2 trillion.