Why is realty sector buzzing?

Realty sector has been buzzing on Dalal Street since yesterday on the back of Fed slashing interest rates by 50 bps and the news that Unitech will enter Nifty Fifty Index. The sector surged by nearly 15% in two days.

Today also real estate stocks were star performers despite the volatility one saw in the markets after yesterday’s huge gains.

BSE Realty Index, the real winner, jumped by nearly 8% in intra-day trade today and closed at 9,044.40, with 6.85% gain over yesterday’s close.

It gained by 13% from close of September 18 and gained by 15.12% as against today’s high and Sep 18 closing price.

The market cap soared by Rs 28831.74 crore in two days and by Rs 14,281.64 crore over yesterday’s close. The major contributors were DLF, Unitech. DLF, Unitech, Akruti and Purvankara hit new life high today.

The Fed cutting interest rates suggests that interest rate concerns are easing off and some experts believe this could this be a precedent for RBI to curb interest rates.

This speculation was the main trigger that gave real estate stocks fillip as this sector is interest driven. Currently the home loan rates are more than 11% and this could ease off in the near term if RBI follows the Fed path.

There were other news as well that contributed to the sectors gain.
 
Realty Index leader in terms of market cap, DLF, has gained by 14% in two days and 5% over yesterday’s day close on the back of the news that DLF is looking to list its subsidiary, DLF Assets, with a one billion dollar issue on the Singapore Exchange.

Delhi based real estate company, Unitech’s stock price rose by nearly 13% in today’s trade and 17% in two days. Unitech will trade on the Nifty from October 5, 2007.

Analysts feel that DLF and one more real estate player will also join the Index in one to one and half years time.

Sunil S Matkar