Nifty Realty index at highest level since Feb 22; surges 25% in two months

Motilal Oswal continues to see re-rating potential in companies, which would provide further growth visibility on the back of strong business development through robust cash flows.

Shares of real estate companies continued their upward movement, with Nifty Realty index hitting 16-month high in Thursday’s intra-day trade as the sector witnessed further growth in pre-sales run rate, on the back of strong consistent demand and healthy launches.

At 12:22 PM; Nifty Realty index, the top gainer among sectoral indices, was up 1.4 per cent, as compared to 0.09 per cent rise in the Nifty 50 index. The realty index hit an intra-day high of 487.15, its highest level since February 2022. In past two months, the index has zoomed 25 per cent, as compared to 6.9 per cent rise in the Nifty 50 index.

Among individual stocks, Sobha has moved higher by 8 per cent to Rs 562 on back of three-fold jump in trading volumes. In past three days, the stock has rallied 11 per cent after the company delivered a solid quarter and annual results with consistently higher sales, the highest ever collections and healthy customer deliveries. The enhanced focus on driving operations at scale and higher efficiency helped the company boost its sales and operational performance, the company said. The company expects a turnaround in earnings before interest, taxes, depreciation, and amortization (EBITDA) margin from Q3FY24.

Shares of Macrotech Developers (Lodha) were up 4 per cent to Rs 565 on the NSE in intra-day trade. In past one-and-half months, the stock has surged 25 per cent, after the company said it is very confident of achieving 20 per cent CAGR in pre-sales over medium term, on back of strong demand fundamentals and supply consolidation. The company expects to grow its pre-sales to around Rs 14,500 crore in FY24.

As highlighted by the management of Lodha and other large companies, the rise in interest rates did not have a negative impact on enquiries or footfalls. These companies expect the sector to witness robust growth over the medium term, backed by favorable affordability conditions and low level of home-ownership penetration in India.

After delivering a significant growth of 43 per cent YoY (32 per cent ex-DLF) in pre-sales in FY23, companies remain optimistic about sustained demand scenario and are aiming at 15-20 per cent growth in the medium term, Motilal Oswal Financial Services (MOFSL) said.

Over the last few quarters, the performance on business development has remained equally strong, lead by Godrej Properties and Lodha, which added new projects worth GDV of Rs 32,000 crore and Rs 19,800 crore, respectively. Consequently, companies have identified a robust launch pipeline for FY24 to support their growth aspirations, the brokerage firm said.

MOFSL further said it continues to see re-rating potential in companies, which would provide further growth visibility on the back of strong business development through robust cash flows.