Travel Stocks in India

India is one of the best countries for tourism. A large number of tourists from other countries visit India, while Indian citizens also travel to other Indian states for an unforgettable experience. The Indian travel industry provides a host of services such as medical, business, cultural, heritage, etc., and allows tourists to fulfil their needs. This is all possible with a host of companies that are either in the travel or tourism business or provide products or services to the travel and tourism sector. Since the travel industry is on the rise in India, travel stocks can offer ideal investing opportunities and the potential to make good returns.

This blog will help you learn about the Indian travel industry and travel stocks in India so that you can use the sector to find ideal stocks and make profits.

India is one of the leading countries when it comes to spending on international tourism. According to a recent report, the travel and tourism industry’s contribution to Indian GDP has increased to US $178 billion and is expected to reach US $512 billion by 2028. The industry is poised to have over 53 million jobs by 2029. Furthermore, travel and tourism is the third-largest earner of foreign exchange in India.

India is one of the biggest hubs for cultural and spiritual tourism and offers other specialised tourism experiences, such as MICE (Meetings, Incentives, Conferences, and Exhibitions), sports, rural, wellness, etc. Furthermore, the travel industry also influences other sectors, such as transportation, infrastructure, insurance, automotive, etc, while offering profits through its own travel stocks.

Travel stocks are stocks belonging to companies operating in the travel and tourism industry. Travel stocks in India offer investors the chance to invest in stocks that are affected by the performance of the travel and tourism sector in India. For example, travel stocks include stocks of railway companies, as railways are one of India's biggest supporters of tourism. Typically, travel stocks belong to airlines, hotels, travel agencies, online travel portals, and related service providers.

Travel stocks are directly affected by the performance of the travel and tourism industry. If, in general, India’s tourism industry contributes more to the Indian GDP, the travel stocks witness a bullish trend. On the other hand, if the tourism industry contributes less to the GDP, the travel stocks in India experience a bearish trend. Hence, as an investor, it is important to analyse the travel and tourism industry extensively to understand its effect on travel stocks.

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Here are the factors to consider before investing in travel stocks in India:

• Regulatory policies: The travel industry in India is heavily regulated by the Indian government. Hence, government policies regarding tourism development, taxation, aviation regulations, and foreign direct investment can significantly impact the industry. Before investing in travel stocks, ensure you are up-to-date with all the government regulations.
• Competitive position: Evaluate the travel stocks by comparing them to their competitors. Furthermore, analyse the company based on its balance sheet, cash flow statement, income statement, profitability, etc.
• Market trend: Before investing in travel stocks, it is important to understand the trends in domestic and international travel to narrow down the segments that are performing well. Based on the analysis, you can choose which stocks to invest in.
• Demand: The Indian tourism sector has been booming after the removal of the COVID-19 restrictions. You can identify companies' stocks that are positively affected by the removal of the restrictions. Such companies can offer quick returns if their technical and fundamental factors are sound.
• Customer sentiments: Shifts in travel preferences, such as the rise of adventure tourism or luxury travel, can impact different segments. Furthermore, new infrastructure can also affect stock prices. Ensure that you have analysed such factors before investing in travel stocks.

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Here are the pros and cons to help you understand if you should invest in travel stocks in India:

Pros:

• Economic growth: Travel stocks generally benefit from economic growth. As India is one of the fastest developing nations, travel stocks can offer good returns over time.
• Post-pandemic recovery: The travel industry is steadily recovering from the impact of COVID-19. As travel restrictions ease and vaccination rates increase, travel demand increases, driving the travel stock prices.
• Technological advancement: New technologies and innovations in online booking, travel experiences, customer service, etc, are helping travel companies and driving the prices of travel stocks.

Cons:

• Economic downturns: Economic downturns are common and unexpected in the Indian economy. Since the travel industry is highly sensitive to economic cycles, such downturns can decrease the prices of travel stocks in India.
• Volatility: Travel stocks can witness high volatility due to factors such as geopolitical events, fuel price fluctuations, inflation, etc. Such negative factors can result in a price decline of travel stocks.
• Regulatory risk: Changes in government regulations, taxation policies, and visa requirements can impact travel demand and operational costs. If these factors negatively affect the travel industry, the prices of travel stocks may see a downtrend.

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India's travel and tourism industry has recovered significantly from the Covid-19 levels. Since then, the industry has been booming, and the companies operating within the sector are earning higher revenues and profits. For this reason, travel stocks have become popular additions to diversified portfolios that can offer good returns over time. However, similar to other industries, the travel industry and the listed travel stocks also come with associated risks, making it important to do due diligence before investing.