The recent leadership change at InterGlobe Aviation, IndiGo’s parent company, has caught the market’s attention. The resignation of Peter Elbers and Rahul Bhatia taking over on an interim basis has raised questions about whether the stock could see a knee-jerk reaction that investors might use as a buying opportunity. However, according to Pankaj Pandey, Head of Research, ICICIdirect.com, the aviation sector is structurally challenged.
“Aviation is a difficult place to work in. From the availability of aircraft, a number of things are required to do well in this segment,” Pandey said. “Along with that, you need the currency to be stable because there are a lot of lease payments going in. Similarly, air turbine fuel also needs to be priced correctly.”
He believes the stock could remain under pressure in the near term and suggests investors may find better opportunities in the broader travel ecosystem. “What we like in travel and tourism is probably something like hotel stocks,” he noted, adding that although these businesses may see “2% to 3% lower growth” due to cancellations, they still offer more controllable operating variables than airlines.
Supply chains are emerging across industries
Beyond aviation, supply chain disruptions are emerging as another area of concern. Bush recently highlighted the dangers of force majeure associated with gas shortages and maritime restrictions, raising fears that similar issues could spread to other sectors.
Pandey believes that such disruptions have both immediate and secondary effects on industries. “Yes, absolutely. If this issue continues for some time, we will see an initial impact with second-order effects on the number of sectors,” he said.
He pointed to sectors such as autos and tires, which could feel the pinch if supply disruptions continue. Export companies may also face challenges. “You can have companies in the export segment, for example, Bajaj Auto typically exports 33 percent, so that can have an impact,” he explained.
Pandey cited the paint industry as an example of how geopolitical shocks can affect corporate margins. “When the Russia-Ukraine war started, Asian Paints witnessed a margin compression of about 400 bps,” he said, adding that companies were eventually able to recover margins after raising prices.
Despite the risks, Pandey believes that the current conflict may not last forever. “At the moment we are still not reducing stockpiles because our feeling is that this war will not last long given the fact that it affects all major geographies, including the United States,” he said.
Electronics manufacturing may see a change
Another area investors are watching closely is the electronic manufacturing services (EMS) space, especially after expectations surrounding new policy developments and government incentives.
Pandey said the sector has struggled recently but could see fresh momentum from upcoming policy announcements. “By the end of this month we should hear something about PLI 2.0,” he said, adding that India’s semiconductor mission could also get additional allocations.
Among the companies he likes is Dixon Technologies, which recently received approval for a joint venture. “Our sense is that the approval of the JV what they have got is probably about ₹3,000-odd crore in revenue with a slightly better margin profile of 11 to 12 per cent,” Pandey said, adding that he sees the stock reaching around ₹13,000.
He also remains positive about other players in the region. “The same is the case with other players like Keynes or even Amber,” he noted, noting the rising demand for cooling products due to high temperatures. “A lot of the bad is behind this part and ideally things should start to improve gradually.”
Energy stocks are increasingly viewed as trading opportunities
Amid geopolitical tensions in the Middle East and volatility in crude and gas prices, energy stocks are also under consideration. However, Pandey believes that investors should approach the sector with caution.
“By and large these energy plays are commercial plays,” he said. “We don’t want to pursue it from a portfolio perspective.”
According to him, volume growth in upstream, downstream and gas-based companies is not significant. While short-term increases in margins or commodity price settlements can temporarily boost earnings, these movements may not translate into sustainable investment opportunities.
Instead, he advises investors to look at sectors that are sensitive to energy costs. For example, tile manufacturers have high exposure to industrial gas prices. “Every 5 affects 5 to 10 percent of their EBITDA,” he said, pointing out that sharp corrections in such stocks can present buying opportunities.
LPG shortage raises questions for food delivery platforms
Meanwhile, reports of LPG shortages affecting restaurants in parts of the country have raised concerns about possible knock-on effects for food delivery companies.
Pandey believes the situation is still evolving and its full impact is unclear. “At this point, we don’t see that kind of impact,” he said, although he acknowledged that supply constraints could continue if order volumes fall.
According to reports, the government has secured around one million tonnes of LPG imports which are expected to arrive later this month. Still, Pandey cautioned that sentiment around related sectors could remain fragile. “It is very possible that we may see some kind of negative ripple in the segments which are affected by the shortage of LPG,” he said.
The IT sector is facing structural questions
The IT sector, which has rallied sharply in recent months, is another sector where investors are debating whether valuations have become attractive.
Pandey said the sector was previously considered a controversial buying opportunity, but rapid advances in artificial intelligence could change the long-term outlook. “With the development of AI it looks like a third of their income will be affected,” he said.
As a result, growth projections that once seemed achievable are now uncertain. “The kind of recovery we’ve been hoping for is questionable as the FY28 high single-digit growth rate,” he explained.
While valuations look attractive after a nearly 20% correction, Pandey believes the sector lacks near-term stimulus. “We don’t see the drivers for IT doing well for the next two or three years,” he said. He added that foreign portfolio investors are constantly selling IT stocks.
Steel producers stand out in metals
However, in the metals space, Pandey sees pockets of strength — particularly among ferrous steel producers.
“Our sense is that this current quarter in Q4, we have already seen a 10% to 11% kind of appreciation in steel prices.” That could boost steel companies’ profits despite higher costs like coking coal, he said.
He expects most players to report improved EBITDA per tonne during the quarter. Among the beneficiaries, he highlighted Steel Authority of India Limited (SAIL) as the top choice. “The biggest beneficiary will be the sale where we have a target price of 200,” he said.
Tata Steel is another company that excels in this field. On the other hand, he is more cautious about non-ferrous metals such as aluminum. Although aluminum prices have also increased by around 10-11%, companies like Hindalco may not benefit fully as a large part of their production is contracted at lower prices.
For investors navigating the volatile macro environment, the message seems clear: while some sectors such as steel and electronics manufacturing may offer selective opportunities, others — including aviation, IT and energy — may remain challenging or better suited to short-term trades than long-term portfolio positions.
