Nifty Realty is the best-performing index in 2023: A look at constituents that contributed the most

The Realty index continued its gaining spell to hit a record high of 617.40 in intra-day deals today, October 11, 2023. Multiple factors including RBI's decision to keep repo rates unchanged, festive cheer, recovery in demand, and encouraging second-quarter business updates from companies drove the index to its new peak.

Another major reason behind the surge in real estate stocks were the rise in foreign investor inflows in the sector. India received foreign institutional inflows worth USD 26.6 billion into real estate during the six-year period from 2017 to 2022, a three-fold rise from the preceding six-year period, according to Nasdaq-listed investment management company Colliers. According to the report, foreign investments accounted for a sizeable share of 81 per cent of the total investments in real estate during 2017-22.

"The country's investor-friendly FDI policies, increased transparency in deal structures, and higher investment limits through the direct route have encouraged global investors to invest in India's real estate sector," it said.

The index has rallied 42 percent in 2023 YTD becoming the best performing sector in the current calendar year. In comparison, the benchmark Nifty rose over 9 percent in 2023 YTD. Meanwhile, in the last 1 year, the index soared over 45 percent versus a 16.5 percent jump in Nifty.

The Realty index has also surged over 66 percent from its 52-week low of ₹370.65, hit on March 29, 2023.

In the 10 months so far of this current calendar year, the index has given positive returns in 6 and negative in 4 months. It has advanced over 6 percent in October so far after a 4 percent jump in September. The index rose the most in April, up 15 percent, in this year.

However, it was in the red in the first 3 months of the year as well as in August, declining the most in January, down 4.7 percent.

In the long term, last 3 years, the index has given multibagger returns, almost tripling its investor wealth. The Nifty realty index has skyrocketed over 184 percent since 2020 versus a 66 percent gain in Nifty.

“The recent surge in the real estate index to a 15-year high underscores the robust momentum in the realty sector. This uptrend, driven by positive quarterly updates from major players, is a testament to the sector's resilience and adaptability. Post-pandemic, we've witnessed a significant rebound in property demand, especially in the luxury segment, with housing sales in top cities registering remarkable growth. The Nifty Realty index's performance, with two of its ten listed players hitting 52-week highs, is indicative of the strong investor confidence in realty stocks. Factors such as the stable repo rate and consistent home loan interest rates have further buoyed this sentiment. Moreover, the record-breaking sales figures reported by companies like Prestige Estate Projects Ltd. and Sobha Ltd. highlight the sector's potential for sustained growth," said Sonam Srivastava, smallcase manager & Founder of Wright Research.

Going ahead, Srivastava expects that in the near to mid-term, realty stocks are likely 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, she added.

Constituents

All 10 Nifty Realty constituents have given positive returns in 2023 YTD with Prestige Estates leading the pack. The stock has surged nearly 58 percent in this period followed by DLF, which rose 51 percent.

In the first half of the current financial year (H1FY24), the Prestige Estate reported registering record-breaking sales of ₹11,007 crore, up 69 percent from the year-ago period, and collections of ₹5,380 crore, up 13 percent. Sales rose 102% year-on-year to ₹7,093 crore in the September quarter. It sold 3,659 units and launched five projects.

Meanwhile, Macrotech Developers, Sunteck Realty and Godrej Properties also advanced between 40-50 percent each.

Recently, brokerage house Jefferies raised the price target of Sunteck Realty by 33 percent to ₹555 from ₹415 after Sunteck's recent move to create a joint platform with the International Finance Corporation (IFC) for an affordable and mid-income housing platform in the Mumbai Metropolitan Region (MMR). According to Jefferies, IFC and Sunteck Realty partnering to create a joint platform with a total investment of up to ₹750 crore provides a significant push to its growth potential over the medium to long term.

The Phoenix Mills, Oberoi Realty, Brigade Enterprises and Sobha also added over 30 percent each in this period. Indiabulls Real Estate was the only stock in the space that gave single-digit returns, up 1.5 percent in 2023 YTD.

Similarly, Sobha also recorded its highest-ever quarterly sales value of ₹1,724 crore, up 48.1 percent from the previous quarter. According to the regulatory filing, Sobha Ltd's share of the sales value stood at ₹1,276 crore, indicating a significant increase of 32.7 percent compared to the same period in the fiscal year 2022.