Realty index beats Sensex

Call it an impact of the hopes of rate cuts in the country or renewed interest by foreign investors, BSE's Realty Index has outperformed big brother Sensex in the last 11 trading sessions "" from the day when the Maharashtra government scrapped the Urban Land Ceiling and Regulation Act (Ulcra), which is expected to free 17,000 acres of land in Mumbai.

The realty index zoomed by 23 per cent in this period, while the Sensex jumped by only 5.7 per cent.

In the last three trading sessions, the index has risen by 720 points, whereas the Sensex has gone up by 302 points. Ever since its launch on July 10 this year, the realty index has gone up by nearly 69 per cent till date, while the Sensex's rise was 33 per cent "" less than 50 per cent of the rise in property stocks' tracking index.

Analysts tracking the sector attribute various factors such as heavy investment by FIIs, hopes of US rate cuts and expectant rate cuts in the country and a psychological impact of repeal of Ulcra in Maharashtra, resulting in the sudden spurt of the realty index.

"A number of fund houses have raised money to invest in infrastructure, which will eventually flow into realty stocks and FIIs are getting clearances to invest in Indian stocks. We expect that money to flow into real estate stocks,'' said an analyst of a national brokerage firm.

The US Federal Reserve's rate cuts by 25 basis points (bps) on Tuesday and expectations of similar cuts by the Reserve Bank of India (RBI) was another trigger for the sharp rise, say analysts.

If the central bank cuts rates again, the demand for housing in the country would improve and realty companies would gain from that.