With double-digit gains in nine out of 10 counters, Nifty Realty index has rallied over 40% so far in 2023 to become the best performing sectoral index. Even as it crossed the 600-mark after a 15-year hiatus, the realty index still has a long way to go to reach all-time closing high of 1,878 touched on 14 January 2008.
“In the near to mid-term, we anticipate realty stocks to maintain their upward trajectory, supported by the continued demand for housing and positive operational updates from developers. Investors should remain vigilant but optimistic, as the sector presents promising opportunities for both growth and value,” said Sonam Srivastava, smallcase manager and founder of Wright Research.
Last week, Bengaluru-based realty firm Sobha reported its highest ever quarterly booking value of Rs 1,724 crore, a YoY jump of 48%, while Macrotech Developers has already achieved 48% of its FY24 pre-sales guidance.
Given the demand outlook and launch momentum, some of the real estate developers can even exceed their FY24 guidance. Demand is also seen outstripping supply in many markets.
“With the interest rate cycle expected to near an end, incentives and schemes offered by developers in the festive season are likely to further boost sales. We estimate that both sales and new launches could reach a ten year high in 2023 and may exceed the 300,000-unit mark,” real estate consultancy CBRE said.
Which realty stocks to buy?
Domestic brokerage firm Motilal Oswal has listed Prestige, Godrej and Macrotech as its top picks.
“Despite the recent run-up in real estate stock prices, we remain positive on select companies, which can continue to report 15-20% growth, driven by their ability to sign new projects through their strong cash generation potential,” said Siddhartha Khemka of Motilal Oswal.
For Dipan Mehta of Elixir Equities, Macrotech Developers is the top bet.
“It has a lot of land banks within Mumbai, South Mumbai, and a lot of opportunities are also opening up on the redevelopment side. So while it may appear to be at a slight premium to its net asset value, it is continuously growing also on account of new projects,” he said.
Chart reading
Nifty Realty index has witnessed a significant upside since retesting the rounding bottom breakout on the monthly charts at 350 levels.
The index has been forming a continuation pattern wherein it witnessed a consolidation followed by a strong breakout above 600 levels.
“The index has an immediate hurdle at 625 levels and weekly closing above this can push it towards 700 levels. It has witnessed a bullish double top breakout follow through on point and figure charts which supports the postulate of a strong upside going forward,” Gaurav Bissa, Incred Equities, said.
Prestige Estates has been a consistent outperformer in the index and has rallied around 55% so far in the year. On the monthly charts, the stock has been making higher highs and higher lows.
Bissa suggests traders to hold the stock for further gains till Rs 900 levels with stoploss trailed at Rs 650 levels.
(Disclaimer: Recommendations, suggestions, views, and opinions given by experts are their own. These do not represent the views of The Economic Times)