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The realty index took the highest hit on both the NSE and the BSE on Tuesday after the RBI announced a cut of 25 bps in the repo rate. According to marketmen, the perceived positive impact of the policy action was eclipsed by the DMK pullout from the UPA Government which shook the overall markets and led to a negative kneejerk reaction on the sector.
While the S&P BSE Realty index fell by 3.6 per cent to end the day at 1950.09, the NSE realty index too witnessed the highest fall of 3.65 per cent to close at 247.95.
On the BSE, the biggest losers were HDIL (down 5.15 per cent) followed by Prestige Estates (down 4.83 per cent), DLF (down 4.22 per cent) and Anantraj (down 4.06 per cent).
“Realty being a high beta counter and a sector which is a favourite of traders is the first to take the highest hit whenever there is major negative news impacting the market.
“Stocks should have reacted positively today but DMK pullout acted as a spoilsport, so true impact would be felt in the next three days only,” Rajesh Jain, Executive Vice-President and Head, Retail Research, Religare Securities. Going forward, the sector is likely to remain under pressure until we see the coming down of interest rates in a big way.
“This looks difficult as the RBI has stated that there is limited headroom for further tweaks till inflation shows substantial improvement,” he added.
Still in trouble
However, several analysts believe rate cut or no rate cut, real estate stocks are far from being out of the doldrums anytime soon. “Operational issues such as high property prices capping demand, strained cash flows and high input costs will continue to be an overhang on the sector.
“Though steps have been taken by developers to take course correction, it will take time for this stabilisation to take place. Till then no uptick in demand or sales volume is foreseen. We are neutral on this sector in the short-term and could see betterment in the second half of FY 2014,” said Sandipan Pal, Realty Analyst, Motilal Oswal.
Developers, though disappointed with the stand of banks in not going for tweaks in their home loan rates or lending rates, are however hopeful of a positive turn going forward.
“It is a good sign and we hope that going forward once we see a rate cut by another 25 bps or 50 bps leading banks such as SBI should pass on the benefit to its customers and show the way for other banks to follow. For developers the need for aggressive funding to address the liquidity issue will continue till then,” said Sunil Mantri, Chairman Mantri Realty.
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