Shares in the rate-sensitive real estate sector came under heavy selling pressure on Tuesday on account of profit-booking, following a sharp run-up in these stocks in the recent rally.
Investor sentiment towards the sector was further dented after headline inflation in September rose to a 10-month high of 7.8 per cent, dashing hopes of a rate cut later this month. The Bombay Stock Exchange (BSE) realty index on Tuesday closed at 1,822.14, down three per cent, declining the most among all sectoral indices. The benchmark Sensex ended 135.85 points or 0.7 per cent lower, at 18,577.70.
The index heavyweight, DLF, the country’s largest real estate company, declined 4.3 per cent to Rs 208, while Unitech fell 4.8 per cent to Rs 25.65. The biggest losers in the BSE realty index were Anant Raj Industries and HDIL, which dropped 6.8 per cent and 5.7 per cent, respectively.
| HOUSE ON FIRE Realty stocks came under heavy selling pressure today | |||
| Name | Oct 15, 12 | Oct 16, 12 | % change |
| BSE Realty Index | 1,879.45 | 1,822.14 | -3.05 |
| Anant Raj Ind | 82.30 | 76.65 | -6.87 |
| HDIL | 106.80 | 100.65 | -5.76 |
| Unitech | 26.95 | 25.65 | -4.82 |
| DLF | 217.25 | 208.00 | -4.26 |
| Godrej Properties | 581.65 | 589.05 | 1.27 |
| DB Realty | 98.75 | 103.65 | 4.96 |
| Compiled by BS Research Bureau | |||
“Some investors have started to pare their holdings in realty stocks as they had risen very sharply,” said Deven Choksey, managing director, KR Choksey Securities. “There is no material improvement in the economy for these stocks to rally. For things to improve for the sector, interest rates should come down first and the economy should do well,” he added.
The BSE realty index had risen 22 per cent in September, outperforming the Sensex which gained 7.6 per cent.
“The sentiment towards high beta stocks in the realty, banking and capital goods sectors has turned negative after their sharp run-up. Investors could again start shifting to technology or defensive stocks,” said independent stock market analyst S P Tulsian. He believes the realty sector index could correct another five per cent from current levels, while individual stocks might fall even more.
The only stock that bucked on Tuesday’s trend was DB Realty, which rose around five per cent to Rs 103.65. On Friday, ace investor Rakesh Jhunjhunwala's Rare Enterprises bought 1.25 million shares of DB. The stock has rallied 15 per cent in the past four trading sessions.
Experts say investors should tread cautiously towards stocks in the sector, as the second quarter earnings could disappoint or not justify the recent run-up. Broking firm Motilal Oswal expects real estate companies to show a 13 per cent year-on-year decline in revenues and a 28 per cent fall in net profit during the quarter ended September.
