Realty stocks dip on monsoon, central bank concerns

Concerned over the forecast of a 12 percent shortfall in rains during this monsoon season and the central bank's concerns over a host of factors including growth and inflation, realty stocks fell sharply on Wednesday, with Unitech leading the losers with a 35 percent drop.

On the Bombay Stock Exchange (BSE), the index for realty stocks was down nearly 5.54 percent at close, with just two scrips out of the 13 that make up its basket managing to stay afloat.

Unitech closed as much as 35.27 percent lower at Rs.8.70. At one point, the scrip lost as much as 52 percent taking into account the day's high and low. It recovered somewhat from that level towards the end of the trading session.

"Realty stocks fell on account of a revision of growth estimates and the Reserve Bank's policy update on inflation" Rajesh Agarwal, head of research on stock markets with Eastern Financiers, told IANS.

"Among other major reasons for the fall were a directive from Income Tax Department on levying taxes on unsold flats -- it said from June 1, all unsold flats will be treated as inventory and will be taxed," Agarwal added.

"In the near future, too, the realty stock will remain bleak."

Among the other listed realty stocks, Indiabulls ended with a loss of 8.08 percent at Rs.50.65. Other stocks that fell included Anant Raj (down 7.12 percent at Rs.33.25), Housing Development and Infrastructure (down 6.48 percent at Rs.97.35) and DLF (down 2.48 percent at Rs.10.30).

The scrips of Sobha Developers, up 0.42 percent at Rs.419.85, and Godrej Properties, up 0.14 percent at Rs.254.70, bucked the trend.

"The cut of just 25 basis point in central bank's lending rates and the below-normal prediction of monsoon triggered negative sentiments in the market," said Prabhat Mittal, a stock market analyst based in Kolkata.

"Realty stocks, going with the market sentiment, also ran into a crisis. Already, in the medium-term basis, the trend is downward sloping in the stock market and it will continue. It is not the best time to hurry for investing in the market," Mittal said.

Adding another dimension to the reasons behind the fall, Vinod Nair, head of fundamental research with Geojit BNP Paribas, told IANS: "There are also concerns of defaults as the sector is under tremendous pressure."

As regards Unitech, analysts said the stock fell in accordance to the trend and being a low-value scrip, the fall got magnified in percentage terms.