With the benchmark Sensex within a kissing distance of 15,000 and overseas funds pouring funds into the Indian capital market, real estate stocks, which were out of fancy over the past year, are gaining momentum again.
Realty stocks have gained much in the past week, perhaps in line with the anticipated listing of Delhi real esate giant DLF Ltd on Friday after the country's biggest initial public offering (IPO) of shares so far. Expectations are that DLF will list at around Rs. 550 against the offer price of Rs. 525 a share.
A robust market sentiment was witnessed on Thursday when Vishal Retail listed at Rs 752 as against the issue price of Rs 270 per share.
Foreign institutional investors (FIIs) are driving the market again. They have pumped in $4.3 billion in the Indian stock market since April 2007. However, this figure includes investments in the primary market such as the fundsthat went into DLF's Rs. 9,187-crore offer. In case ICICI Bank’s $5 billion follow-on public offer is included, the inflow will have increased substantially.
"India is a happening story and there is great appetite for Indian assets outside," said Uday Kotak, executive chairman of Kotak Mahindra Bank. “A country with more than a billion people growing at eight per cent plus and expected to maintain this momentum in the medium term provides a great investment opportunity for those with a long-erm horizon,” he added.
With such a strong inflow, realty stocks are going to be re-rated, said S.P. Tulsian, a leading broker. “In the last one week, the market has witnessed fresh demand of realty counters. And once DLF would be listed, the entire industry will re-ated,” he added. "Since the institutional investors need to invest in the market leaders as we have seen Temasek acquiring 5 per cent stake in Bharti, there will be appetite for the DLF also," he added.
In fact in June when the DLF issue was open, the market perception was that the issue would be listed below the offer price as some of the existing realty stocks like Parsvanath Developers were trading just above their offer price. In the last one week, most of these stocks have appreciated by 15 per cent.