Warren Buffett-led Berkshire Hathaway’s move of selling its airline shares at substantial losses is likely to have a ripple effect among the investor sentiments, not just in the US, but globally, analysts said.
Market experts said that investors in India too might have got concerned by the move and the implications may be seen in the Indian stock markets too.
They said that stocks of several industries, including airlines, might get hammered in the days to come, since retail investors would be weary of investing in them after Warren Buffet dropped off from the scrips of the airline industry.
Retail investors globally, including those in India follow the ‘Oracle of Omaha’ and his statements and market moves carry a lot of weight for the market and the other market participants.
Investors in Indian airline stocks may well follow his movement as the country’s airline sector is struggling to survive under the lockdown.
Rahul Sharma, Research Head at Equity99 Advisors said: “Because Warren Buffett himself is such a big name, any action he takes, other investors do follow him. Airlines are anyways shut now and even before that airline were not in a good shape, so I think selloff will be witnessed in global and Indian markets.”
He said that oil stocks are also likely to take a hit, as the demand for aviation fuel also has hit rock bottom.
Sharma said that both global and Indian indices may open in the red on Monday. The Nifty50 may open 200-250 points lower on Monday.
Deepak Jasani, Head of Retail Research at HDFC Securities said that the negative impact on airline stocks in India will be seen for the next couple of days. He noted that government support is required by the sector.
Buffett’s statement during the annual shareholders’ meeting on Saturday showed a grim picture of the aviation sector.
Addressing the virtual meeting, he said: “We made that decision in terms of the airline business. We took money out of the business basically even at a substantial loss.”
“We will not fund a company that… where we think that it is going to chew up money in the future,” he added.
Berkshire Hathaway had an 11 per cent stake in Delta Air Lines, 10 per cent in Southwest Airlines, 10 per cent in American Airlines, and 9 per cent in United Airlines.
Since COVID-19 took the world in its grip, commercial aviation industry has been totally halted hampering their business and even leading several airlines globally to file for bankruptcy.
According to a recent report by International Air Transport Association (IATA), the revenue of the sector in India may fall by $11,221 million this year compared to 2019.
Further, as many as 29.32 lakh jobs are likely to be at risk in India’s aviation sector during the year 2020.
According Conrad Clifford, IATA’s Regional Vice President for Asia-Pacific, had said airlines in the region face a liquidity crisis with a $61 billion cash burn in the second quarter of 2020.