Realty stocks expected to move up

Analysts expect an upside of 3-5%

Stocks of the beaten-down realty sector are expected to move up in the run-up to the results, said analysts. There could be an uptake of about 3-5% in these stocks going forward, they said.

On Wednesday, the BSE Realty sector index was up 4.3% as the markets rallied on positive trade data. The BSE Sensex ended the day up 1.3% to 20,249.

“Investors have been buying into the sector ahead of the results. The sector has been an underperformer and valuations at this point are looking attractive,” said Alex Mathew, head of research at Geojit BNP Paribas Services. He added that the September quarter earnings for some of these companies like Prestige, Sobha developers could be better than expected.

In the past six months, the BSE Realty sector has fallen by 30%. Sector analysts said that the stocks are up for a rise in prices due to the recent 50 basis points cut in the short-term borrowing rate by the Reserve Bank of India (RBI) as well as the debt restructuring plans for some of the companies like DLF.

“The RBI’s decision to cut the marginal standing facility by 50 basis points to 9% was expected to benefit the interest-rate sensitive sectors like auto, realty, banking among others. The move would ease liquidity pressure on the system,” added Mathew.

From a technical perspective, analysts said that these stocks were due for an upswing. “There has been a pick-up in the mid-cap F&O segment where a lot of long positions have been built. Stocks like DLF, Indiabulls Real estate have seen a reversal in their trends,” said Shubham Agarwal, vice-president and senior analyst technical – equities, Motilal Oswal Financial Services.

Since the beginning of this month, DLF has risen by 14.4%, Unitech by 14.6% and Indiabulls Real Estate by 12.8%. During the same period, the realty sector index has risen by 12.3%.

On Wednesday, DLF ended the day up 5.8% to Rs 146.95. Unitech was up 7.5% to Rs 18 while Indiabulls real estate was up 8.2% at Rs 60.95.