Mutual funds dumped it in July, but stock still up 36% in 6 months; buy or avoid?

Mutual funds pared their holdings in InterGlobe Aviation Ltd (IndiGo) in July, booking profits as the stock gained 3.49 per cent in the month and nearly 35.88 per cent over the past six months, supported by a favourable crude oil price environment. Domestic funds offloaded 40 lakh shares worth about Rs 2,400 crore, trimming their holding to 6.10 crore shares at the end of July from 6.50 crore a month earlier. 
Marketmen have mixed views on the stock, given June quarter was affected by multiple external headwinds, including geopolitical tensions, airport closures, reduced block hours, and elevated cancellations, resulting in lower yields alongside higher passenger and flight cancellations. 

Emkay Global, which hosted the company management, noted that the September quarter Q2 has shown signs of stabilization, and the company expects a strong rebound with robust growth in Q3 and Q4.

IndiGo maintained its double-digit YoY ASK growth guidance for FY26, though Q2FY26 growth is expected to be in the mid-to-high single digits due to seasonal softness in domestic demand. As a result, the airline has strategically suspended some underutilized routes and undertaken structural inspections and modifications of certain aircraft to prepare for a stronger Q3, Emkay Global noted.

ASK growth is seen rebounding to double digits in Q3 and Q4. Robust orderbook offers IndiGo ample operational flexibility to adjust its fleet and network. 

The airline expects no challenges in ramping up capacity in H2FY26. It also retains the option to add more damp-leased aircraft, while the PLFs provide additional headroom for growth.

Nuvama in a recent note said the near-term outlook for IndiGo looks challenging as growth in capacity outpaces demand, hurting yields. 

“Current valuations are unsupportive, but positive factors make the risk-reward balanced. We fine-tune our estimates to factor in Q2 guidance and the impending drop in lease rentals as the AoG situation improves, yielding a 4% rise in target to Rs 5,428; retain ‘HOLD’,” it said, 

MOFSL suggested ‘Buy’ on IndiGo with a target price of Rs 6,900. Emkay Global also retained its ‘Buy’ on the stock with a target price of Rs 6,500. 
JM Financial suggested ‘Hold’ and a target price of Rs 5,305. InCred Equities has a target price as low as Rs 3,030, suggesting a ‘Reduce’ rating on the stock.