Reacting to the repo rate hike by the Reserve Bank of India (RBI) on late Wednesday, the already-battered stocks in the realty sector witnessed a high bout of volatility on Thursday.
The Realty Index of the Bombay Stock Exchange (BSE) was the worst performer amongst sectoral indices, losing more than 3% in afternoon trade on Thursday, but recovered from its day?s low to end in positive terrain.
The BSE Realty Index had an intra-day swing of more than 400 points before finally closing the day at 5,820.90 points, posting a marginal gain of 17.24 points or 0.30% from its previous day?s close. Experts attribute this intra-day volatility to short covering at lower levels.
A derivatives analyst at one of the leading broking firm said, ?Investors had a huge short built-up in the real estate stocks due to the uncertain interest rate scenario and investors covered most of their positions on Thursday which led these stocks to recover from their low. Many of the realty stocks are still trading at a multiple higher than Sensex stocks and it is very unlikely that investors would opt for the sector till the interest rates eases out.?
The BSE Realty had lost more than 7% on Tuesday to come back strongly in the next trading session on Tuesday surging by more than 3%, to again witnessed high gyrations on Thursday. The stock of Indiabulls Real Estate, after moving in the range of Rs 50, recovered the most on Thursday to close at Rs 394.95, gaining Rs14.05 or 3.69% followed by Unitech which gained Rs 4.80 or 2.60% to end at Rs189.15 after moving in the range of Rs 20.
However, DLF continued to move in negative zone, much below its issue price, and as on Thursday, the stock lost Rs13.50 or 2.64% to close at Rs 497.70.
Manish Shah, head retail equities and derivatives, Motilal Oswal Securities, said, ?The real estate sector is most sensitive to interest rates as the cost of holding for both, the builder as well as the property buyer, moves in tandem with the changing interest rates. The mismatch in pricing for sellers and the buyer is the most critical issue for the real estate companies.?
Other interest rate-sensitive sectors also bore the brunt on Thursday. The BSE Auto closed the day in the negative, losing 3.76 points or 0.09% to end the day at 4,148.55 points. However, the BSE Bankex closed the day in the positive, gaining 19.47 points or 0.28% to close the day at 7,037.89.