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Out of the shadow

After being hit for the wrong reasons due to the sub-prime issue in the US, realty stocks rally on the Mumbai bourse, reports Vyas Mohan.

india Updated: Sep 14, 2007 22:24 IST
Vyas Mohan
Vyas Mohan
Hindustan Times

With worries of a liquidity crunch arising from the US sub-prime mortgage market receding, shares of real estate companies staged a rally during the week.

While the benchmark Sensex of the Bombay Stock Exchange (BSE) gained only 0.09 per cent or 13.38 points to close on Friday at 15,603.80 points, the BSE Realty Index swept up 502.48 points or 6.73 per cent to end the week at 7972.75 points.

Market experts feel that the real estate stocks were battered for the wrong reason while the US sub-prime mortgage issue was at its peak, as investors sold these stocks fearing a credit crunch contagion into the wider economy and a fall in realty prices. Further, the demand for property has been pretty strong and investors are now focusing more on fundamentals than stock prices.

"People are realising that there are no dangers of a fall in real estate prices. The sector fell for the wrong reason during the US sub-prime mortgage issue, as it had no relevance in the Indian context. The sector now looks quite steady," says Ramdeo Agarwal, Joint Managing Director of Motilal Oswal.

However, brokers feel that the shares in the sector have run up a bit too much in the current week and could slow down in the very near-term.

"The sub-prime issues have subsided and the sector looks stable now. Real estate prices will be affected only in case of a probable recession in the US and its spillover into the global economy. However, shares in the sector may slow down in the next week," says Madhukar Sheth, a BSE broker.

While the BSE real estate index firmed up during the week, shares of Mahindra Gesco gained the most during the week gaining Rs 70.25 or 13.8 per cent to close on Friday at Rs 578.20. It was followed by Akruti Nirman, up 6.36 per cent at Rs 631.90. The major losers in the index during the week included Housing Development (down by 11 per cent at Rs 549.15, Omaxe (down by 0.97 per cent at Rs 330.30), Sobha Developers (down by 0.32 per cent at Rs 755.40).

First Published: Sep 14, 2007 22:16 IST