Godrej Properties, Brigade, other real estate shares rise up to 3%: Here are four reasons

Real estate stocks

Real estate shares rose up to 3 percent on October 10 due to various reasons like Fed rate cut, value buying and more. The Nifty Realty index closed nearly 2 percent higher at 896.65, with Godrej Properties, Brigade Enterprises, Lodha and Prestige Estates leading the gains.

Here are various reasons behind the rally in real estate shares:

1) Value buying

Nifty Realty is currently trading 21 percent below its 52-week high. Value buying could be a reason for the index rising for the second straight day. Investors are finding value in the sectoral index amid positive brokerage views.

Last month, Elara Capital highlighted that demand momentum remains strong, supported by healthy absorption trends, robust balance sheets of listed developers, and increasing participation in the luxury housing segment.

2) Expectations of a Fed rate cut

The US Federal Reserve is set to hold its next FOMC meeting at the end of this month. Investors increasingly expect the American central bank to cut rates this time, after cutting its interest rates by 25 basis points to a range of 4.00-4.25 percent during its September meeting.

While the Indian real estate players are mostly domestic market-oriented, investors expect a rate cut by RBI's MPC to follow Fed's rate cut. Any rate reduction by the Indian central bank likely boosts real estate demand, thereby pushing the stocks up.

3) TCS HR head denies reports of 80,000 layoffs

Tata Consultancy Services (TCS) has denied reports that it laid off 50,000 to 80,000 employees, calling the numbers “extremely exaggerated.” The company’s Chief Human Resources Officer, Sudeep Kunnumal told Mint that TCS has released only about 1 percent of its workforce, which is roughly around 6,000 employees as part of a restructuring exercise.

Brigade Enterprises and Prestige Estates, the two top gainers on the Nifty Realty index today, are based in Bengaluru. Lower than expected layoffs and the positive impact on the overall IT pack will likely increase the demand for homes in tech-capital Bengaluru. These expectations boosted the stocks further up.

4) Navi Mumbai airport

Prime Minister Narendra Modi inaugurated first phase of Navi Mumbai International Airport on Wednesday, marking a major milestone in India's aviation infrastructure. The state-of-the-art airport, built at a cost of 19,650 crore rupees, is expected to begin commercial operations by December and ticket sales are likely to start by the end of October.

The newly-made airport in Navi Mumbai is expected to boost housing demand, benefitting the real estate players with strong presence there, including Godrej Properties.

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