Hotel stocks rally: Indian Hotels, Lemon Tree, HLV share prices zoom 20% on RBI’s liquidity support

Das announced a separate liquidity window of Rs 15,000 crore to mitigate the adverse second COVID wave impact on certain contact-intensive sector. (IE Image)

Hotel stocks such as Indian Hotels, Lemon Tree Hotels, EIH Associated Hotels, HLV surged up to 20 per cent after the Reserve Bank of India (RBI) Governor Shaktikanta Das announced liquidity support to contact intensive sectors like the Hotel industry. Das announced a separate liquidity window of Rs 15,000 crore to mitigate the adverse second COVID wave impact on certain contact-intensive sectors such as hotels and restaurants. This window will remain open till March 31, 2022, with tenors of up to three years at the repo rate. Although this would aid the hotel and tourism sectors, the near-term outlook still seems to be unstable, said Likhita Chepa, Senior Research Analyst at CapitalVia Global Research. “Investors are advised to choose stocks selectively from these sectors which are supported by strong financials and placed well to utilize the measures announced by the RBI,” Chepa added.

Among individual stocks, HLV, EIH Associated Hotels zoomed 20 per cent to Rs 10.80 and Rs 373.65, respectively, also their new 52-week highs. Royal Orchid Hotels surged 10 per cent to Rs 92.70, while Indian Hotels share price was close to its new 52-week high of Rs 144.25, surging over 6 per cent. Similarly, Gujarat Hotels shares were locked in 5 per cent upper circuit at Rs 194.75 apiece. Shares of Lemon Tree Hotels jumped 5 per cent to Rs 45 and Chalet Hotels gained 4.3 per cent to Rs 195.40 apiece. “An increased on-tab liquidity support of Rs 15,000 crore to banks for offering three years tenor of loan to contact-intensive sectors augur well to spur economic activities in coming months,” Binod Modi, Head Strategy at Reliance Securities said.

On May 5, 2021, RBI decided to open an on-tap liquidity window of Rs 50,000 crore with tenors of up to three years at the repo rate till March 31, 2022, to boost the provision of immediate liquidity for ramping up COVID-related healthcare infrastructure and services in the country.

RBI Governor Shaktikanta Das said that banks are likely to create a separate COVID loan book under the scheme. He explained that by way of an incentive, such banks will be eligible to park their surplus liquidity up to the size of the COVID loan book, created under this scheme, with the RBI under the reverse repo window at a rate which is 25 bps lower than the repo rate or, termed in a different way, 40 bps higher than the reverse repo rate. “Banks desirous of deploying their own resources without availing funds from the RBI under the scheme for lending to the specified segments will also be eligible for this incentive,” he said.