Realty Index surges 6.3% despite concerns; Unitech major gainer

Markets ended today’s trade on high note. At closing bell, Sensex ended up 196 points while Nifty ended up 45 points. Realty stocks were clear winners today. Realty Index surged 6.3%. Unitech was a major gainer in today’s trade. The stock ended up 16.70%. Other gainers among the realty stocks were HDIL, Mahindra Life Space, each up over 8%, DLF, up over 6%, parsvnath Developers, up over 5% and Peninsula Land, up over 4%.Ajay Bagga, Head of Private Wealth Management at India-Deutsche Bank said that there is still pain left in the realty sector and he would be more negative on the sector. He said that there is a still huge amount of leverage in the realty stocks.

He further said that there is liquidity in the market as the banks are putting Rs 25,000-30,000 crores a day in reverse repo at 3.5%. There is liquidity even with households but there is no credit flow and there is no investment flow that is happening especially into real estate. Residential is quite dormant. There is question over the commercial space. Demand having gone down, there is demand impact as well as an over supply is coming through.

However, he said that it is too early to call it a bottom in the real estate pack. Some more selling might be witnessed in the realty stocks.

Research firm Macquarie is of the view that the problem of availability of capital still remains as it remains completely frozen. Residential volumes are down by over 25% (YoY). The tightness in the debt and equity markets had led to a significant rise in the number of private equity deals in 2008. Macquarie feels that the worst is over from a liquidity perspective for India’s banking system.

From the above views, it is clear that the problems with the realty sector will continue further. However, today’s surge has resulted in the surge in realty stocks as well, irrespective of all the negative points. Moreover, a continued short covering is seen in the market, which also might have prop up the realty stocks today.

No related posts.