Nifty Realty up 2.5% on July 29; what's driving the rally? Analysts weigh

Nifty Realty in focus: Nifty Realty Index, an index representing the real estate sector in India, rallied as much as 2.48 per cent to hit an intraday high of 1,104.45 levels on Monday, July 29, 2024. 

However, at 12:18 PM, the index had moderated slightly, trading 1.89 per cent higher at 1,098, while the Nifty50 remained relatively flat at 24,832.35.

A major driver behind this rally, analysts said, is DLF’s strong June quarter performance. 

The stock zoomed as much as 5.58 per cent to hit an intraday peak of Rs 876 per share. The boost follows DLF’s robust quarterly performance, highlighted by a whopping 214 per cent year-on-year (Y-o-Y) increase in new sales bookings, totaling Rs 6,404 crore. 

 

“Our development business recorded another quarter of strong sales booking of Rs 6,404 crore leading to a record first quarter sales booking. We launched the second phase of our luxury project in New Gurugram- Privana West, which witnessed strong demand momentum and consequently was entirely sold-out clocking Rs 5,600 crore of new sales bookings,” DLF said in a statement.

Among other stocks from the Realty index, Lodha dipped 0.57 per cent. On the other hand, Prestige surged 3.08 per cent, followed by Oberoi Realty (up 1.85 per cent), Sunteck (up 1.52 per cent), Mahindra Lifespace (up 1.43 per cent), Brigade (up 1.17 per cent), Phoenix (up 0.90 per cent), Godrej Properties (up 0.89 per cent), and Sobha (up 0.68 per cent).

Independent analyst Ambareesh Baliga attributes the rally to the market's response to recent changes in long-term capital gains (LTCG) tax regulations. Baliga notes that the impact of the LTCG hike has been less severe than anticipated, with market enthusiasm remaining strong.

Similarly, Prem Khurana, research analyst at Anand Rathi Institutional Equities, highlights that despite concerns over the removal of indexation benefits for LTCG, large, branded real estate developers report no major negative impact on sales velocity or demand. This reassurance has buoyed market sentiment, contributing to the rally.

Baliga also points to a shift in investor focus towards real estate, driven by a desire to upgrade living standards. 

Increased salaries for CXO-level employees post-COVID have further stimulated interest in premium housing, leading to a surge in realty stock prices, analysts said.

Given the current market conditions, Baliga advises investors to use a trailing stop-loss strategy to manage risk while capitalising on the gains in real estate stocks.