Realty index closes at 15-year high, ‘stocks a buy on dips’

Mumbai: Real estate stocks were among the top performers on Thursday as the bullish momentum in the sector drove the share prices of many of them to record levels. The Nifty Realty index soared 6.76% – its largest single-day jump since September 2021 – to its highest closing in 15 years as against the Nifty’s gains of nearly 0.7%.

Shares of Bengaluru-based Sobha jumped 15.82% to an all-time high closing of Rs 1,296.60 after brokerage Motilal Oswal Financial set a price target of Rs 1,400 on the stock while rating it as one of the top picks for 2024. Macrotech Developers (Lodha) rose 9.55%, Godrej Properties gained 7.81% and DLF advanced 6.55%. Oberoi Realty, Kolte Patil, Prestige Estates, and Brigade Enterprises, which gained between 5% and 10%, were at record highs.

The realty index closed at 841.30 – the highest since June 17, 2008.

“Most of the listed realty companies are sitting at new highs in terms of sales, pricing and launches,” said Aamar Deo Singh, head of advisory at brokerage Angel One. “We see strong sales momentum, the pan-India revival of the housing boom, particularly uptick in the premium and luxury segments, backed by easing debt burden as some of the key return drivers supporting the real-estate companies.”

Real estate stocks were among the best performers in 2023, with Nifty Realty’s returns of 81.35%, compared to 20% gains in the Nifty index. Analysts expect the rally to continue even in 2024, and investors should be buying quality stocks on dips.

“Even though the real estate sector has seen a sharp run-up today, any dips should not be considered negative, and could be buying opportunities for investors,” said Dharmesh Shah, Head of Technical Research, ICICI Direct.

Shah sees further buying interest in Oberoi Realty, DLF, Godrej Realty and Kolte Patil.Investors are betting on a revival in the residential property market, which is reflecting in sales numbers of listed real estate companies.

“Since mid 2020s, the Indian housing cycle has been on an upswing. Housing sales have since doubled, and supplies are still only catching up,” said Naveen Kaushik Ranjan, Senior Director at Windmill Capital.

“The Indian housing market has seen volumes surge by 25% YoY in 2023, doubling in 3-years.”

Some experts believe investors and traders should wait for better entry levels to these stocks.

“We would advise investors to remain prudent and look at corrections to add onto the realty stocks in their portfolio, as the risk-reward ratio would not justify fresh entry at current levels,” said Singh.

Ranjan believes that the rally in realty stocks has already priced in most of the expected positives. A potential interest rate cut would help the affordable housing segment. “If talks of the Government reviving its interest subvention scheme for affordable housing goes through, there could be some more steam to the rally,” he said.