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Realty sector stocks have been gaining for the past two weeks, with these beaten down scrips seeing a short-term pullback. Technical analysts said some of these could prove to be good purchases, as share prices are expected to see a further rise in the next three-four months.
They named Prestige Estates, DLF, Sobha Developers and Unitech among those in for a short-term reversal in the trend and likely to go up by as much as seven per cent in the next few months.
“Some of the realty stocks had been beaten down significantly. What we are seeing now is a pullback from these levels and, going ahead, we could see higher levels in the next three-four months,” said Shubham Agarwal, vice-president and senior technical analyst, equities, Motilal Oswal Financial Services.
Others also see more gains for realty stocks. “The trend is positive and we are expecting an upside of seven-eight per cent in some of these. We’re particularly bullish on DLF,” said Ashish Chaturmohta, head, technical and derivatives analysis, Fortune Equity Brokers.
Analysts said the signalling of further cuts in the short-term borrowing rates by Reserve Bank of India had worked well for these companies. Also, market participants believe if the central bank does not increase the repo rate further in the October 29 policy review meeting, it would provide a further boost.
However, if RBI decides to raise the policy rate, it could lead to these stocks paring the gains seen recently.
Technical analysts said while some of the realty companies might not be good long-term bets, they could still provide good returns in the short term because of the pullback in share prices. Indiabulls Real Estate and DLF were among the likely ones, said analysts.
Since the beginning of October, the Indiabulls’ stock has risen 15.4 per cent and by about 14 per cent since April this year. DLF has also risen by 19 per cent since October but is down by nearly 35 per cent since April 1. The story is the same for Sobha Developers, Prestige Estates and Unitech, which have risen in the past 15 days but are down on a financial year-to-date basis.
The BSE Realty index has since April fallen by 25 per cent but has gained about 13.5 per cent in October.
The rise in broader markets (the Sensex is up six per cent in October) has also helped improve sentiment towards the realty sector. However, some analysts are not sure on the sustainability.
“The realty sector has been a constant underperformer since 2009 and could continue to be so. There will be some bouts of rally, depending on the short-term or long-term view of the market,” said Sahaj Agrawal, deputy vice-president, derivatives research, Kotak Securities.
Select stocks could outperform but broadly the sector is expected to underperform over a larger timeframe, he added.
