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Stocks belonging to the realty and infrastructure sectors have soared on the exchanges, on speculation that there may be a Cash Reserve Ratio (CRR) cut by the Reserve Bank of India in its monetary policy review on January 24.
“All the interest rate sensitive sector-stocks have risen. Realty, infrastructure and capital goods stocks, which were beaten down badly last month, have seen a recovery now,” said Ms Shanu Goel, Research Analyst, Bonanza Portfolio.
On Tuesday, BSE Realty index was up 4.20 per cent from the previous close. The stocks on the realty index such as Unitech, DLF and Housing Development and Infrastructure saw a rise of 7.08 per cent, 3.82 per cent and 6.11 per cent respectively from their previous close on the BSE.
“As many real estate companies have raised money through FCCBs, the stabilising rupee is positively impacting their stocks. They are seeing signs of a pick up,” said Ms Madhumita Ghosh, Head of Research, Unicon Financial Intermediaries.
Analysts are of the opinion that the surge in these stocks could be temporary. They are not positive on real estate as a sector for the long-term.
Many stocks in the capital goods sector also saw a surge. Stocks belonging to this sector were up by nearly four per cent on Tuesday. According to Mr Sanjeev Zarbade, VP Research, Kotak Securities, the durability of the rally in capital goods sector stocks witnessed on Tuesday remains to be seen. “The valuations are reasonable at this point of time and value investing could be happening but the durability of the rally has to be seen, with several companies set to announce their results soon. Expectations are muted as the second quarter results were not very encouraging,” he said.
Last week, the stocks in the capital good sector had surged on account of the HSBC Purchasing Managers' Index (PMI) indicating an improvement in the manufacturing sector's performance in December.
Some stocks in the power sector have also risen on expectation of a rate cut. Reliance Infrastructure was up by 5.22 per cent, closing at Rs 398.45 at the end of the day. GMR Infrastructure also closed in the green, at Rs 25.50 (up 3.66 per cent).
“Infra stocks in general have taken a huge beating overall in the last year when they lost 60 to 70 per cent. They are expected to do well in the second half of this fiscal, as the market seems to be reacting to a positive sentiment of no further rate hike expectation by RBI,” said Mr Shailesh Kanani, Infrastructure Analyst, Angel Broking.
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