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IndiGo’s parent, InterGlobe Aviation Ltd, has suffered a sharp sell-off due to the operational meltdown just days before its inclusion in the Sensex, becoming the worst-performing stock to enter the benchmark index in the last 15 years, based on one-month pre-inclusion returns.

BSE Index Services announced on 21 November that InterGlobe Aviation would replace Tata Motors Passenger Vehicles on the prestigious 30-scrip index on 22 December. This one-month period is a critical window, as the stock typically sees a reshuffle-driven rally as institutional and passive index-tracking funds realign their portfolios.

Initially, the stock followed this trend, gaining 1% post announcement. However, the early December operational crisis erased those gains. The airline's execution lapses during the transition to new flight duty time limitations (FDTL) triggered mass flight cancellations, sending the stock down 15.7% over the past month.

Data shows that joining the Sensex is usually a tailwind for stock prices, with 69% of the last 29 entrants seeing a flat or upward trend. In fact, the median return leading up to inclusion is a healthy 3.2%. While some gains peaked at 43%, IndiGo’s nearly 16% drop stands in stark contrast.

That said, only nine out of the 29 stocks analyzed declined in the month prior to their inclusion, and only a handful approached this level of volatility. The only companies to come close to IndiGo’s poor showing were Jindal Steel, which fell 15.5% in 2010, and Vedanta, which dropped 14% in 2018. While seven other stocks did see negative returns, their losses were far more contained, ranging between 0.2% and 4%, further highlighting the unprecedented nature of IndiGo’s current collapse.

With the airline’s index debut overshadowed by operational turbulence, all eyes are now on whether this battered blue-chip can pull out of its descent and chart a course towards sustained financial recovery.

Historically, the momentum generated by index inclusion is often fleeting. Of the 20 stocks that enjoyed a pre-inclusion rally, only six managed to sustain that positive momentum three months later, even when the rest of the market remained in the green. “Empirical work on Indian indices shows inclusion effects are largely transitory: prices often move around announcement and effective dates, but there is no durable 'free alpha' purely from being added," said Sachin Jasuja, head of equities and founding partner, Centricity WealthTech.

Though the history of poor performers offers some glimmer of hope. Among the nine stocks that entered the Sensex with a decline, four of them actually rebounded and posted gains in the subsequent three-month period. Notably, the closest comparison, Jindal Steel, which fell by 15.5% before inclusion in 2010, made a strong comeback with a 15.5% gain in the three months following its entry. HCL Technologies, which slipped approximately 4% in the month leading up to its inclusion, rebounded with a 9% surge over the subsequent three-month period.

Can IndiGo defy the current crisis and embark on a rare path of recovery once it joins the blue-chip elite?

“IndiGo’s meltdown looks like a painful but finite execution shock to an otherwise strong franchise, and history on index inclusions suggests the stock can recover once operations and narrative normalize," Jasuja added.

The ensuing index rejig is expected to drive inflows of around $320 million, translating into roughly five days of IndiGo’s average trading volume, noted Abhilash Pagaria, head of Nuvama Alternative & Quantitative Research. In the near term, the stock could see a 2–3% uptick on Friday, he added further.

He, however, said sustaining strong momentum post-inclusion may be challenging, as historically valuation-rich stocks tend to consolidate or underperform for an extended period—often up to a year—after being added to domestic indices.

The next two to three quarters will be pivotal in determining the airline's long-term trajectory, according to experts. “If IndiGo can normalize operations by late FY26, maintain cost discipline, and avoid harsher regulatory sanctions, the market will likely re‑rate it based on earnings and cash‑flow visibility rather than index optics," Jasuja highlighted.

Similarly, Shrikant Chouhan, head of equity research at Kotak Securities, said the recovery hinges on operational execution; however, he maintained a bullish outlook with a price target of ₹5,350—representing a notable upside from the current trading price of ₹4,979.85.

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