Realty stocks hit hardest in recent fall

Real estate, metal and banking stocks were the hardest hit in the recent slide on the bourses. Investors, sensing that these sectors may be affected by the turmoil in the global credit markets, dumped shares of DLF, Unitech, Indiabulls Real Estate (among real estate), Hindalco and Tata Steel (metals), and ICICI Bank and State Bank of India (banking).

The BSE Metal and BSE Realty indices, which were the biggest gainers in July (before the fall on July 24), rose by 17 per cent and 14 per cent, respectively. However, since July 24, the BSE FMCG Index, which tracks companies such as Hindustan Unilever and ITC, has been the only gainer.

The index rose 1.04 per cent, but experts reckon capital goods and cement stocks as good investment bets in the current volatile markets.

"The drying up of liquidity worldwide after the US subprime crisis, which was followed by a series of steps taken by the Reserve Bank of India (RBI) to tighten liquidity, and the hardening of interest rates have impacted the real estate stocks," said Ketan Karani, head of research at Kotak Securities.

The BSE Realty Index, which shed nearly 20 per cent from its one-month high since July 24, witnessed the highest fall in the recent stock market turbulence among all sector-specific indices. Indiabulls Real Estate fell 24 per cent during the period.

Shares of other property developers "" DLF (down nearly 16 per cent), Unitech (down 23 per cent) "" also faced significant selling pressure after the crisis in the US mortgage market came to the fore.

The benchmark BSE Sensex lost nearly 11 per cent during the period.

For the metal stocks, there was more direct correlation in India to the US subprime crisis. Experts said prices of most commodities including copper, nickel, aluminum and zinc, had fallen in the international markets on speculation that a global credit squeeze might persist and curb demand for commodities.

The UBS Bloomberg CMCI index, tracking 26 commodities, has lost 4.7 per cent this month and dropped to a four-month low on August 16.

"There is a growing feeling now that there will be a slowdown in demand for commodities globally due to liquidity crunch," said Chintan Modi, head of commodities at India Infoline.

The BSE Metal Index lost 20 per cent as the metal stocks such as Hindalco (down 26 per cent), Tata Steel (down 23 per cent), Sterlite Industries (down 15 per cent), Hindustan Copper (down 28 per cent) bore the brunt of the fall in commodity prices in international markets.

The banking index, the BSE Bankex, rose nearly 18 per cent this year till July 24. "There was profit-booking in most banking stocks, after the run-up in prices this year. Further, there is a feeling that the credit offtake might take a hit, going forward," said Karani of Kotak Securities. ICICI Bank lost 15 per cent during the last one month, while SBI fell 9 per cent.