Nifty realty index surges another seven per cent on improving business prospects

NEW DELHI: After gaining more than 80% in 2023, the highest for any sectoral index, the Nifty Realty Index surged 7% on Thursday as shares of index heavyweights- Sobha, Microtech Developers (Lodha), Godrej Properties, DLF and Brigade Enterprises- jumped between 6% to 16% on improving business prospects and buy call from brokerages.

Market analysts have attributed strong buying in reality stocks to expected interest rate cuts by banks in the coming months following a dovish stance maintained by the Federal Reserve. The index jumped over 7% intraday to hit its fresh 52-week high of 844.40 and finally closed 6.76% higher at 841.30 with all 10 components closing in the green.

Shares of Prestige Estates, Oberoi Realty, Mahindra Lifespace Developers and The Phoenix Mills jumped between 4% and 6%. Shares of Puravankara closed with a 13% gain on Thursday. Naveen K R, small case manager & senior director at Windmill Capital said Nifty realty index has outperformed the broader market in 2023, marking a strong turn since RBI paused on rate hikes in March 2023. A potential rate cut in 2024, as global rates likely head down, will be positive for the sector, added Naveen.

“However the strong rally in realty stocks has priced in some of these gains. It is important to note that property sales have favoured premium & luxury housing in this upturn so far. A potential rate cut could actually help the affordable housing segment more. With talks of government reviving interest subvention scheme for affordable housing, there seems to be more steam to the rally,” he said.

Naveen explained since the mid-2020s, the Indian housing cycle has been on an upswing. Sales have since doubled, and supplies are still only catching up. The housing market has seen volumes surge by 25% YoY in 2023, doubling in three years. As per analysts, 2024 should see a residential volume rise of 10%+ with an upside if mortgage rate cuts and/or govt. policy support.

The surge in realty stock also came as overall market sentiment remained positive after the minutes of the latest Federal Reserve meeting, released late on Wednesday, indicated that the policymakers are convinced that inflation has come under control and a rate cut is expected by March 2024.