Real estate stocks end 9-day winning run on profit booking; Nifty Realty falls 3%

Real estate stocks tumbled in today's trade as investors engaged in profit booking following a 9-day rally, which had propelled the Nifty Realty index to log a double-digit gain.

The index is currently trading with a 2.66% decline at 1,119 points, having hit an intraday low of 1,111, down by 3%. Leading the losses within the index was Sobha, which dropped 4%, followed by Prestige Estates Projects, Godrej Properties, Brigade Enterprise, and Macrotech Developers, all trading with declines between 3% and 3.5%.

Other prominent stocks, such as Phoenix Mills, Oberoi Realty, and DLF, also saw falls of up to 3%. Notably, Sunteck Realty was the only stock in the index trading with a significant 6.9% gain amid market turbulence.

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Following one of their worst intraday performances on June 4, real estate stocks resumed their winning streak in the subsequent session after the ruling Bharatiya Janata Party (BJP) secured sufficient support from key allies to form a coalition government, ensuring Modi’s return to power for a third consecutive term.

Investors anticipate continued strong economic growth despite the coalition government set up, projecting that the government's focused emphasis on Capex growth over the past four years will persist, which is expected to bolster the country's economic engine, driving growth and strengthening it further.

Amid this backdrop, from June 05 to June 18, the index surged from 976 to 1,150 points, marking an impressive gain of nearly 18%.

As the Indian economy has experienced robust growth in recent years, disposable incomes among Indians have risen, prompting increased investment in the real estate sector. Real estate has been a preferred choice for the majority of Indians.

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Consequently, developers experienced a stellar response, with sales soaring within hours of opening bookings. Despite facing higher interest rates and implementing multiple price hikes to offset the rising costs of raw materials, the demand for housing in India continued to escalate unabatedly.

Robust financial performance, reduced inventory levels, and successive price hikes collectively fueled the surge in demand for real estate stocks, resulting in massive returns. Impressively, 70% of the index constituents have generated returns ranging between 100% and 300% over the past year.

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Looking forward, the upward momentum in realty stocks is anticipated to persist through FY25, buoyed by projections of sustained robustness in the Indian economy, with GDP expected to exceed 7%.

Fitch Ratings has recently upgraded India's growth forecast to 7.2% for the fiscal year, citing a rebound in consumer spending and increased investment. Similarly, the World Bank raised its GDP growth projection to 6.6% from 6.4%, reflecting optimism about economic recovery. 

Also Read: RBI maintains status quo; ups FY25 GDP growth target

The Reserve Bank of India also revised its GDP growth forecast upwards to 7.2%, driven by rising private consumption and a resurgence in rural demand.

Disclaimer: We advise investors to check with certified experts before taking any investment decisions.