Does Nifty Realty index’s resilient surge in 2023 set the stage for optimism in 2024?By Naveen K R Since mid 2020’s, the Indian housing cycle has been on an upswing. Housing sales have since doubled, and supplies are still only catching up. The Indian housing market has seen volumes surge by ~25% YoY in 2023, doubling in 3-years. While housing supply has started matching demand in 2023, due to sales velocity, supply is down to near all-time lows of ~16-17 months. This is a 12-year low, across the top 7 cities of India. Due to a combination of these factors, pricing has kept rising through 2023, with a ~12% average YoY growth. According to analysts, 2024 should see a residential volume rise of 10%+ with increased upside if mortgage rate cuts and / or govt. policy support. The Nifty realty index has outperformed the broader market in 2023, marking a strong turn since RBI paused on rate hikes in March ’23. A potential rate cut in 2024, as global rates likely head down, will be positive for the sector. However the strong rally in Realty stocks so far, has priced in some of these gains. It is important to note that property sales have favoured premium & luxury housing in this upturn so far. A potential rate cut could actually help the affordable housing segment more. With talks of the Government reviving its interest subvention scheme for affordable housing, there seems to be some more steam to the rally. (Naveen K R is a smallcase manager & Senior Director at Windmill Capital. Views expressed are the author’s own. Please consult your financial advisor before investing.)
However, he believes that the impact on the Indian market is going to be temporary since there could be some short-term impact on flows into Indian equity markets. But since the Indian economy is on a strong wicket and will continue to remain resilient.
“Improved fiscal situation, controlled current deficit, stable interest scenario combined with good corporate earnings should lead to limited impact on the Indian bond market and equity market too,” he added.
The midcap and smallcap indices took a bigger knock with the BSE MidCap fell 2.51%, while BSE SmallCap index dived 4.18%. According to Amnish Aggarwal, head, research, Prabhudas Lilladher, the valuations were already high and some correction was expected. “If the situation sustains as it is then further correction can’t be ruled out,” Aggarwal said.
Telecommunication and industrials indices were the top laggards with BSE Telecommunication declining 3.82%, followed by BSE Industrials falling 3.26%. JSW Steel (-2.99%), Tata Steel (-2.52%) and Tata Consultancy Services (-2.44%) were the top losers of Sensex.
Surprisingly, both foreign portfolio investors and domestic institutional investors were net buyers today. While, FPIs net bought shares worth Rs 252.25 crore, DIIs have purchased shares worth Rs 1,111.84 crore, as per provisional data from exchanges.
Calling this a “normal phenomena” Pankaj Pandey, head, research, ICICI Direct said, “I will not really give too much weight to a single day buying figure. Amid concerns of elevated interest rate and geopolitical tensions, in a typical market cycle, 8-10% correction is possible at any point in time.”
The brunt of geopolitical conflict, elevated interest rates and rising crude oil prices was also felt by other Asian- Pacific markets. Jakarta Composite Index lost 1.57% followed by Shanghai Composite Index and PSEi, which fell 1.47% and 0.89%, respectively. Nikkei and KOSPI declined 0.83% and 0.76%.