BSE Realty nosedives on high inflation

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Sector needs more stability: Analyst.

Our Bureau

Mumbai, Jan. 6

Upward inflationary pressures and the continuous influx of negative news have further pushed the BSE Realty index to spiral downwards — it closed down by 2.41 per cent on Thursday.

The index, which had been the worst performing index for the BSE in 2010, saw a steady decline through the day and closed at 2713.74.

Although this index has tanked more than any other, analysts said that the sector may see a comeback in the next two years. But for now the “bleeding continues”, as one analyst put it.

“The sector had never gained any strength and has not been able to fully recover from its fall in 2008. Therefore, any sort of negative news will act as a trigger for the stocks to fall,” said Mr R.L. Narayanan, Vice-President of equity and institutional sales, Bonanza Portfolio Limited. “What the sector needs is more stability, in terms of price and supply equilibrium. We expect the real estate sector to do well from the Q2 of FY ‘12.”

Mr Param Desai, a logistics and real estate analyst with Angel Broking, said: “Once the corporate governance mechanisms are in place and the balance sheets are cleaned up, the sector will start seeing a recovery. This could take a couple of years. For now, the performance of the index is more stock-specific.”

Market experts are of the opinion that the recent suggestions by the International Monetary Fund to the RBI to increase repo rates (to tame inflation) is bound to have an impact on the realty sector.

Of the 15 stocks in the index, 12 saw declines in their stock prices while three saw an increase at the end of the day.

The biggest fall was seen by Unitech, which fell 5 per cent drop to end the day at Rs 61.80. The highest increase in share price, of 1.23 per cent, was seen in the stocks of Sobha Developers, which closed at Rs. 322 a piece.

Sobha Developers, Pheonix Mills and Godrej Properties were the only scrips in the index to close in the green.

(This article was published in the Business Line print edition dated January 7, 2011)
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