Real estate stocks in focus; Oberoi Realty, DLF advance over 5%

Shares of real estate companies were in focus with the Nifty Realty index gaining 3 per cent on Friday. Oberoi Realty and DLF rallied 8 per cent and 6 per cent, respectively, on the National Stock Exchange (NSE). Brigade Enterprises, Sobha, Godrej Properties, Sunteck Realty, and Indiabulls Real Estate were up in the range of 1 per cent and 3 per cent.

At 12:26 pm, the Nifty Realty index was up 2.9 per cent, as compared to a 0.38 per cent rise in the Nifty 50 index.

Oberoi Realty hit an over six-month high of Rs 443, up 8 per cent on the NSE, on the back of heavy volumes. A combined 428,000 equity shares have changed hands on the counter on the NSE and BSE so far.

According to technical analysts at ICICI Securities, the share price of Oberoi Realty has resolved out of the past four months' healthy base formation (Rs 300-400), which was formed near the lower band of past seven years rising channel, indicating acceleration of upward momentum. They believe that the stock has undergone a healthy basing formation while pricing in many negatives. The brokerage firm has a target price of Rs 485 per share on the stock.

The sharp volume decline amid Covid-19 was an exacerbation of already struggling residential real estate due to weak macroeconomic conditions. The company has maintained its target to launch the Thane project by Diwali, subject to the normalisation of Covid-19, the brokerage notes.

The company, however, termed the pandemic-led dislocation to be the precursor of the industry consolidation with weak players likely to shut shop. "While we concur with company’s assessment, we also believe that pain could be elongated considering the big-ticket size of real estate as well as the relatively steeper impact on key cities including Mumbai, the brokerage firm said in a stock update," ICICI Securities said in a note dated September 16.

The brokerage further said that the near-term challenges in the residential demand, hospitality segment, and malls are visible but Oberoi Realty is well positioned to tide over the same with comfortable debt levels and the fundraising. Nonetheless, it expects the recovery to be a slow grind with demand recovery at least taking a year, and build in slower volumes traction, going ahead.