From last few days, nifty has now formed a new support for it which lies around 10500. Thanks to 20 percent fall in crude oil prices, which is helping our Domestic currency in its recovery.
Crude oil prices have already entered comfortable position for our economy. Only currency is the last headwind remaining in the path of investors from investing aggressively. USD INR below Rs70 is the level which should be treated as good one for our economy.
Overall, i think the situation is getting improved and definitely, it will help our market to sustain at more higher levels.
Because we import most of our requirement of Oil, a lower crude price and USD INR is a better situation for our country rather than higher crude prices and weaker rupee.
In our share market, the two sectors which are extremely linked to the prices of these two are OMCs and Aviation Sector.
No doubt, after recent fall in crude oil prices, Aviation stocks should trade little higher because lower crude oil price means lower cost on purchase of ATF, which will boost profitability. However, almost 100 percent rise in shares of a Aviation company in just 1 month is not like seen most of the times.
Well, you know whom I am talking about. Yes… It is Jet airways shares which have seen some unseen and unexpected rally in last few days.
After unofficial statements like Jet airways hasn’t enough cash to carry business for even a quarter from inside the company, it was common to see some sharp selling activity in company’s shares.
In October, stock made a low of around Rs 170 after such negative statements which remain unofficial till present date. However, Talks with Tata for as a partner proved as a big support for stock at lower levels. In recent Board Meeting of Tata Sons held on 16 November, Tata Sons have clearly mentioned that they are considering this topic and may take some action on it soon. But the talks for any acquisition have still not reached any final stage.
Definitely, such announcement from Tata’s board is a positive sign for jet airways but is little negative too when the stock has already rallied more than 100 percent on the back of such news.
Among many different developments taking place for the jet airways, the two major are Possible sale to Tata and Crude Oil activity.
In relation to Crude Oil, one should not forget that in March Quarter earnings of this year or Q4 FY18, company had reported fuel cost around Rs 2000 crore when Brent crude was trading around $ 60-70. And now when crude oil is again trading between this range, the maximum cost reduction we can see in fuel cost will not match the current quarterly loss, which is around Rs 1300 crore!
In recent quarter earnings report of FY19, company had reported around Rs 2400 crore as a fuel cost. So, even if we assumes that fuel cost will come down to Rs 2000 crore which will hardly reduce quarterly loss to Rs 900 crore, it will still not change the status of negative cash flow of company. Until Brent crude oil will not fall to around $50 or government provides some relief to Aviation companies by reducing ATF prices, I don’t think matter of Crude Oil should be taken as a major component of any investment decision in Jet Airways shares.
Efficiency of company’s business is now stand somewhere at the lowest point. At current levels of crude oil, other Aviation companies will be able to again report profits in next quarter. But jet airways would again have to report losses in next quarter because of its higher expenditure on fuel cost and other expenses which doesn’t seems to fall sharply soon.
So, remaining Tata Deal or any other possible deal with other investor is the only way which can save Jet Airways.
At current levels, it is not a situation for taking any fresh bet on company’s shares because Jet airways stock has already seen sharp rally in last few days, most probably on the back of investment talks with Tata’s. Now, if this talks goes further higher and reaches any final plan, then it might possible to see some more buying in shares.
However, as per current scenario, I think Jet airways has some space to rise upto Rs 410-420. I have arrived at this target by this…
Before, when company had reported Rs 1000 crore loss in Q4 on account of higher fuel cost, shares of company have fallen upto Rs 380. After this, negative statements like company has only 60 days cash position to fly, employees are not fully cooperating with the company after extension of salaries payment etc, came in the market which had devalued the shares more. But with recent ongoing talks for a possible investment partner, shares of Jet airways were definitely entitled for a revaluation. Interestingly, the possible Partner or Investor could be Tata Group which is huge positive. I think most of the part of this revaluation rally have already covered up and only a small portion of this is remaining now.
Jet Airways share price forecast
Overall, I think those who are holding shares of Jet Airways from lower levels should continue holding them for the target of Rs 410. You can book your profit from this share if it goes below Rs 249. Because then it would be a indication that talks for investment are close to failer with either Tata or any other interested Investor!
You can also place a stoploss at around Rs 289. But use this level for stoploss only when you have bought shares around current levels of Rs 310 and you don’t want to take any big risk. Stoplosses around 280-290 have little higher chances to get triggered soon because of higher volatility present in the shares of Jet Airways.
Have any question related to this post! Feel free to ask through comment box given below.