Aviation stocks closed off the day's high ahead of the Cabinet decision on allowing foreign direct investment in India's airlines.
Shares in debt-laden Kingfisher Airlines ended 8 per cent higher at Rs 10.81. The stock had earlier surged 14 per cent. SpiceJet gained 4.4 per cent at Rs 34.50 while Jet Airways advanced 2 per cent at Rs 368.35.
The government will discuss norms to allow investment by foreign airlines in the aviation sector today evening. Under the current rules, foreign airlines are barred from buying stakes in domestic carriers, although foreign investors are allowed to hold a cumulative 49 per cent.
A Cabinet note says that under the FDI proposal, foreign airlines will be allowed to invest in Indian peers, but can only hold up to a 49 per cent stake. Although a 49 per cent stake gives the investors minority shareholder control, they will get the right to block a special resolution.
The government, in its FDI in aviation proposal, has attempted to cover most areas of concern voiced by political parties. According to the Cabinet note, it is proposed that the chairman and two-thirds of the board of any domestic airline receiving FDI will need to be Indians, and substantial ownership and control will remain with Indian nationals.
Most of India's airlines are bleeding and private airlines like Vijay Mallya's Kingfisher have been pushing for FDI to boost the sector.
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