Shares of BLS International Services, a tourism sector play, have delivered a whopping 4,721 per cent returns since March 23, 2020, the day when India went into complete lockdown. From the low of Rs 8 on that day to now (Rs 380) its journey has been out of the ordinary. A dozen other stocks have given returns between 1,222 per cent and 122 per cent in this period, indicating the kind of investor interest this sector has generated.
These 13 stocks are now part of the newly launched Nifty Tourism index which has 17 constituents. Apart from BLS, the others include Safari Industries (India)
The Indian Hotels Company (IHCL), EIH GMR Airports Infrastructure, Lemon Tree Hotels, Indian Railway Catering And Tourism Corporation (IRCTC), Mahindra Holidays & Resorts India, Interglobe Aviation (Indigo), Chalet Hotels, Westlife Foodworld, VIP Industries and Jubilant FoodWorks.
In this period, the market capitalisation of these stocks went up between 4,740 per cent and 122 per cent , nearly by as much as the rise in their share price.
Four other stocks were listed post the lockdown period namely Restaurants Brand Asia (Dec 14, 2020), Easy Trip Planners (EaseMyTrip, Mar 19, 2021), Devyani International (Aug 16, 2021) and Sapphire Foods India (Nov 18, 2021).
Barring EaseMyTrip which has seen a 77 per cent deterioration in its share price, the rest have given positive returns between 87 per cent and 42 per cent over their issue price.
In the meantime, India’s headline index Nifty50 has seen its returns grow by 219 per cent as of July 3, Wednesday traversing from levels of 7610.25 to 24286.50. Its market capitalisation has taken a leap from Rs 58.73 lakh crore to Rs 193 lakh crore.
Market expert, Sonam Srivastava, founder & fund manager at Wright Research attributed the multibagger returns to factors like pent-up demand for travel experiences post the pandemic, rising disposable incomes fueling travel spending, and supportive government initiatives promoting domestic tourism. The strong performance of the stocks which are now part of the Nifty Tourism Index has come after the 2020 lockdown, she added.
The company, which also operates Agoda, Priceline and Kayak, said the Indian government has launched several tourism projects to improve infrastructure, enhance connectivity and increase access to many of the country’s tourist destinations. Additionally, they have also implemented visa-friendly initiatives such as e-visa or visa-free entry to many countries, which has propelled inbound and outbound travel.
Concurring with the view on growing per capita expenditure of the Indian households on non-food items, Riya Oswal Bafna, Co- Fund Manager at Purnartha One Strategies highlights the latest spending trends. “The average monthly per capita expenditure (MPCE) by an average household in urban India on non-food items is 61 per cent , whereas in rural areas is 54 per cent of the total expenditure. Thus, the non-food pie is growing along with more than 50 per cent expenditure on non-food,” Bafna said.”The average household spent Rs 486 in rural areas, against Rs 855 in urban areas in the year 2000, as against 3773 in rural areas, and 6459 in urban areas in the year 2023. Thus, the growth in rural and urban expenses over the last 23 years has been more than 6.5 times,” she said, adding that the opportunity size for discretionary expenses is only growing.
The launch of the Nifty Tourism index on June 18 gives fresh ammunition to the sector and could trigger traction on tourism as a theme, the two experts opine.
“The launch of the Nifty Tourism Index presents a compelling option for investors to approach the tourism sector thematically, rather than through individual stock selection,” Srivastava of Wright Research said as she listed the advantage of this latest NSE move. “The index inherently provides diversification across various segments of the tourism industry, such as airlines, hotels, and travel agencies. This diversification can help mitigate risk compared to focusing on a single company’s performance,” she added.
The index will also eliminate the need for extensive individual stock research, allowing investors to capture the broad growth potential of the tourism sector with a single investment, the Wright Research analyst said.
Also Read: NSE launches Nifty India Tourism Index. Check top stock constituents
The Nifty India Tourism Index will track the performance of stocks from the Nifty 500 Index which represents the travel and tourism theme. The largest 30 stocks from eligible basic industries are selected based on 6-month average free-float market capitalisation. Currently, there are 17 stocks with stock weights capped at 20 per cent .
The stocks have been selected from consumer services, services, and consumer durable segments. The highest weight has been accorded to Interglobe aviation at 20.31 per cent while the lowest to Westlife Foodworld at 2.49 per cent .
The base date for the index is April 1, 2005, and the base value is 1000. The index will be reconstituted semi-annually and rebalanced on a quarterly basis.
Stocks to buy
Srivastava’s recommendation is BLS because of its near-monopoly in visa processing positions which will help the company and stock to capitalise on the travel surge. Another top pick for her is EIH Hotel on the back of recent strong results and positive momentum.
Investors should investigate the former’s dependence on government contracts and potential changes in visa application procedures before making a move, this analyst said. As for the latter, the investors should be mindful of competition within the hospitality sector and their strategy for sustaining this growth.
For Bafna, hotels remain a top investment theme within this sector and Indian Hotels its best bet.
On the index level, the performance has been robust but individual stocks have shown underperformance over different market cycles. While BLS, IHCL and Safari have been outliers with consistent year-on-year performances, others including Restaurant Brands, Indigo, VIP Industries and Jubilant Foodworks have been so consistent.
“So, the trend is picking at a very strong pace, whether we would stick to a specific company or the index would be at the investors end, as a fund manager, it’s a sector which will be on the radar to be tracked and invested,” Bafna said.
