Bharti Airtel, one of India’s leading telecom companies, has seen its shares surge a whopping 30% from their 52-week low levels of ₹1,510.80 hit in November 2024. In the ongoing calendar year, too, Airtel has clocked decent gains of 23% despite high stock market volatility, signalling continued investor interest.

Bharti Airtel shares today, too, defied the weak stock market sentiment and ended over 1% higher.

What’s behind the rally in Airtel shares?

Explaining the rise in Airtel shares, Harshal Dasani, Business Head, INVAsset PMS, said that the surge has been underpinned by a sharp fall in capital expenditure, which has boosted free cash flows and enabled faster deleveraging.

Tariff hikes over the past year have also pushed average revenue per user (ARPU), a key metric for telecom companies, to ~ ₹245 in FY25, with the figure expected to cross ₹280 by the end of FY26.

Domestic brokerage Kotak Institutional Equities (KIE) expects these two factors to aid strong earnings and FCF growth for the telcos, including Airtel.

“We expect the market construct for the telecom operators to remain favourable over the medium term. Vi’s funding shortage and R-Jio’s upcoming IPO make for a strong case of continuous tariff repair through a mix of hikes and non-tariff measures,” said the brokerage.

Reliance Jio and Bharti Airtel recently discontinued their entry-level recharge plans, nudging subscribers to upgrade to premium plans. While this may not result in a sharp jump in ARPU, it could be a strategy in the direction of premiumisation and data monetisation.

The market construct appears favourable to monetise the explosion in data consumption, and KIE believes such non-tariff measures would play a crucial role in aiding the ARPU uptrend going forward. It estimates ~11% ARPU CAGR over FY2025-28E, with the next hike in 4QFY26E.

Should you buy Airtel shares?

Airtel remains KIE’s top pick as it finds Bharti the best direct play in telecom. It has an ‘Add’ rating on the stock, with a target price of ₹2,100.

Dasani, however, said that while structural drivers support a gradual re-rating, near-term gains are likely to be more measured, driven by steady ARPU expansion and disciplined capex rather than runaway growth.

He flagged the concerns on valuation, Africa business and competition from Reliance Jio.

“Valuations are no longer cheap with the stock trading at over 30x earnings, leaving limited room for error. Forex volatility, particularly in its Africa business, remains a key risk alongside regulatory uncertainties over pricing and spectrum costs. Competition from Reliance Jio continues to be intense, and the pace of monetisation in new growth areas like 5G, enterprise cloud, and digital services will determine the next leg of earnings,” he added.

Airtel shares: Tech view

Meanwhile, technically, Bharti Airtel’s structure remains positive with potential for further strength.

“Airtel has completed a 48-day rounding pattern and confirmed a breakout at 1950 levels, setting the stage for an upside move towards 2100. While volumes on the breakout were relatively low, this is typical of large-cap stocks where institutional participation often builds gradually. The technical setup remains strong as all major moving averages and momentum indicators are bullishly aligned, supporting the case for sustained upside momentum,” said Anshul Jain, Head of Research at Lakshmishree.

Any dips closer to breakout levels should be considered healthy retests, offering accumulation opportunities for investors looking to ride the upmove, he added.

Disclaimer: This story is for educational purposes only. The views and recommendations expressed are those of individual analysts or broking firms, not Mint. We advise investors to consult with certified experts before making any investment decisions, as market conditions can change rapidly and circumstances may vary.