Summary of this article
Nifty Realty crashed 4.50 per cent to hit a more than two-month low
Godrej Properties, Lodha Developers and Aditya Birla Real Estate led losses
Rising crude prices, bond yields and Fed rate fears hurt realty stocks
The Nifty Realty index crashed as much as 4.50 per cent in morning trade on Septembr 11, sinking to a more than two-month low, as a broad-based selloff swept through Indian equities.
At 9:58 AM, the sectoral index was trading 4.50 per cent lower at 832.80, the session’s lowest level, with losses spread across nearly every constituent. However, towards the sesison’s end, the index made some recovery.
Godrej Properties bore the brunt of the selling, falling 6.62 per cent, while Lodha Developers and Adity Birla Real Estate dropped 4.67 per cent and 4.08 per cent, respectively. Prestige Estates fell 3.12 per cent, while Oberoi Realty, Brigade and DLF settled in the 2-2.50 per cent range.
The pressure on markets came from a rise in global bond yields and crude oil prices. US producer price data released on September 10 showed that energy costs rose sharply last month. This raised concerns that inflation could stay high and increased expectations that the US Federal Reserve may raise interest rates at its September 15-16 policy meeting.
Sachin Gupta, vice president of technical research at Choice Broking, said, "Realty stocks are under pressure today as the broader risk-off mood has triggered strong selling in this high-beta, rate-sensitive segment." He attributed the sharper cuts to mounting worries over crude prices, inflation and the interest rate outlook, compounded by profit booking after the sector's earlier run-up.
US Treasury bond yields added to the pressure after the government bought back fewer bonds than the market expected. This pushed the 10-year US Treasury yield close to 5 per cent. Higher crude prices also added to inflation concerns, sending bond yields higher across major markets and putting pressure on stocks.
Rate-sensitive sectors saw some of the biggest losses. The Nifty Metal index fell 2.22 per cent as investors worried about higher US interest rates.
Indian government bonds also came under pressure on Friday. The benchmark 10-year government bond yield crossed 7 per cent in early trade, its highest level in more than three months. Higher crude prices and rising US bond yields weighed on investor sentiment.
Markets are now waiting for the US consumer price index data, due later today, for the next signal on the Fed's interest-rate decision.
Gupta advised investors to "avoid aggressive bottom-fishing in realty stocks at this stage." Long-term investors, he said, could look at selective accumulation, but preferably in a staggered manner and confined to companies with "strong balance sheets and healthy project pipelines."
