Market Voice: Prakash Agarwal, Analyst, RBS Equities

'Prices cannot fall by more than 10%'

As realty stocks witnessed a strong build-up over the last week, Prakash Agarwal, analyst, RBS Equities, tells Krishna Merchant the recent rally is just a catch-up by a sector that has been a laggard for almost an year. Edited excerpts:

The realty index has been continuously leading gains for the last one week. Quite a many scrips buzzed in the last session also. What is your outlook for this space?
Most of these have been laggards in terms of price performance for the past six to 12 months and are catching up now. Fundamentally, there has not been much improvement. Volumes, which picked up in FY10, have stabilised now. The recent run-up is more of a catch-up on the valuation front.

Is this a good time to enter realty stocks?
One has to be stock specific. There are companies with some near-term concerns regarding debt positioning and capability to launch and monetise their land banks.

DLF’s first quarter results were not so good. However, it plans to raise Rs 2,500 crore through the sale of non-core assets to retire debt. Is there any upside left for this stock?
For the near term, we believe the stock’s performance will be weak in comparison to its peers. Expect a good performance in the second half of FY11, once launches and asset sales are in place. This will bring down debt and increase volumes. We have given a ‘hold’ rating with a target of Rs 360.

What is your call on HDIL and Indiabulls Real Estate?
We have given a ‘buy’ rating on HDIL, with a target of Rs 320 for the medium term, on the back of execution of the Mumbai airport project and relocation of Phase-I by November. We have also given a ‘buy’ rating on India Bulls Real Estate, with a near-term target of Rs 280, due to its attractive valuations (on the basis of discounted cash flow and net asset value).

Do you think a rise in property prices in cities like Mumbai will dampen demand?
Since supply is sustained and spread over the next five years, demand will be intact. Prices cannot go down by more than 10 per cent.