On Monday, real estate stocks advanced for the sixth straight day, adding to last week’s gains as the status quo by the RBI means relief for home buyers from higher interest costs.
The BSE Realty index was the top gainer among all sector indices for the second consecutive session Monday, rising over 4% to close at 3,369.53. The index is up 13% since the end of March when it fell to a nine-month low of 2,969.83.
“The cycle for real estate stocks is turning positive,” said Pankaj Pandey, head of research at ICICI Securities. “In the last one year, real estate stocks drastically underperformed the benchmark indices and we see the catch-up rally to continue.”
While RBI’s pause bodes well for the entire sector, the debt-to-equity ratio of most listed real estate companies has improved in recent years, which may lead to a structural uptrend for the sector, especially the organised players, Pandey said.
In calendar 2022, the Nifty returned 4.3%, while the Sensex gained 5.8%. In contrast, the Realty index fell 10-12%.
Mumbai-based Godrej Properties surged over 9%, its biggest single-day gain since November 2021 after the company said it recorded the best-ever quarterly sales. Domestic brokerage firm Motilal Oswal on Monday upgraded the stock to ‘buy’ and set a price target of ₹1,575 on the stock, implying an upside of 28% over Monday’s closing price of ₹1,227.25. The brokerage raised FY24 and FY25 pre-sales estimates by 23% and 44%, respectively, to factor in recent project additions, and believes the company is on track to achieve its pre-sales target of ₹20,000 crore by FY26.Godrej Properties was the second-best performer in the BSE 500 universe. More than 45 lakh shares exchanged hands on the BSE and NSE, over nine times its combined average daily volume for the last month. The stock has jumped 22% in the last five sessions to close at ₹1,227.25 per share on the BSE.
All constituents in the Realty index ended in the green on Monday with New Delhi based DLF (+5.6%) and Bangalore-based Prestige Estate (+6.7%) among the top 10 gainers in BSE 500.
“With the housing cycle turning and launches improving, we believe Mumbai realty sales would remain healthy going ahead; this would benefit Macrotech Developers (Lodha), Oberoi Realty, Godrej Properties and Sunteck Realty,” said Parvez Qazi, analyst, Nuvama Institutional Equities.
