Construction Stocks Shoot up Despite Bullish Trend in Real Estate

April 3, 2009	(Be the first to rate this story!)  Loading ...
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Major construction-related stocks led by realty giant DLF, Jaiprakash Associates, HDIL, IVRCL Infra and Indiabulls Real Estate helped increase investor wealth by $1.5 billion as around 50 shares representing the sector rose by an average 4.7% on Thursday as the benchmark index rescaled 10,000 peak. This surprised marketmen as they see no new reason for construction-related stocks, especially real estate, to go up as challenges confronting these companies remain. However, the investors and traders at the markets were bullish on real estate as the BSE Realty index, (which is down 21% for the year), gained 150 points or 9.13%. Except Unitech (unchanged) and Akruti (5% down), all the other 12 constituents were up between 3-16%, BSE data shows. The BSE Realty index captures price movements of only 14 stocks. But a bigger action was witnessed in the construction-related counters with companies involved in contracting, civil construction, housing and real estate finding favour with investors.

While Delhi-based DLF topped the investor wealth added list with Rs 4,537 crore (15% up), Jaiprakash Associates (engaged more in the civil construction side) added Rs 1,338 crore to its investor kitty as its stock rose 13%. The stock of Mumbai-based HDIL gained 13% adding Rs 323 crore to its investor wealth, IVRCL Infra gained Rs 250 crore by virtue of its 14.7% stock rise, Indiabulls Real Estate added Rs 238 crore with its 9.2% stock jump. Other major stocks such as IRB Infra, Nagarjuna Construction, Anant Raj Inds, Hindustan Construction and Mahindra Life Space added Rs 100-200 crore to their investor wealth by virtue of their 7-16% stock gains on Thursday’s trading session.

Analysts seem sceptical of the rise in shares values. “Even with the correction that has been there in the past 12 months, real estate is not one sector to be in. Consumers are deferring purchases, rental yields are yet to adjust…the fate of the sector is intrinsically linked to the real economy, which is yet to show a sustained resurgence. Plus, selling properties at lower prices is not good for margins” Hitesh Agrawal, head of research at Angel Broking, said. Derivative traders said that real estate stocks such as DLF, HDIL and Indiabulls Real Estate have seen a build up of fresh long positions. Over the last week or so, short positions in many frontline construction-related stocks have reduced with rollover costs down on a month-on-month basis, an institutional equity dealer at a foreign brokerage explained.

News Published Under:   Real Estate Developers |

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