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Mumbai: Real estate companies are on a roll. In less than two months since the sensex hit rock bottom in 2009 on March 9, the price of six realty stocks on the BSE have more than doubled (see table). Meanwhile, the price of 26 stocks have gained over 50% during the same period. Compared to this, the BSE sensex has gained about 46%.
Investors in these stocks have made about Rs 31,000 crore during this period with the combined market capitalisation of 54 listed realty stocks at Rs 77,400 crore.
While analysts said a combination of factors have led to this sudden surge, market players are advising caution.
Three reasons have led to this spurt. During April, a large chunk of debt by real estate funds had come up for repayment and most got restructured at lower interest rates. This substantially reduced stress on the cash flow of these firms, a real estate analyst with a local brokerage said. According to estimates, in April, mutual funds alone, through a host of fixed maturity plans, restructured debts amounting to over Rs 10,000 crore from realty companies.
The last couple of months also witnessed sector leaders like DLF, Unitech and HDIL selling dwelling units although smaller ones are still struggling, the analyst said. This has enthused investors that the worst could be behind.
The third reason is lately some of the large firms sold part of their assets or backed out of ambitious projects. "Moves like these are helping realty firms generate cash and at the same time reduce debt,'' a sector observer said.
Some market players are cautious since they haven't forgotten how these stocks were hammered all through 2008. The rally also shows how Dalal Street reacts. "We go from extreme pessimism to practical optimism in 72 hours,'' said Anish Jhaveri, CEO, Antique Stock Broking. "The fact that some of the stocks had fallen over 90% was also over-reaction, on the other side,'' Jhaveri said.
The sensex on Wednesday shed 178 points to close at 11,953.
Investors in these stocks have made about Rs 31,000 crore during this period with the combined market capitalisation of 54 listed realty stocks at Rs 77,400 crore.
While analysts said a combination of factors have led to this sudden surge, market players are advising caution.
Three reasons have led to this spurt. During April, a large chunk of debt by real estate funds had come up for repayment and most got restructured at lower interest rates. This substantially reduced stress on the cash flow of these firms, a real estate analyst with a local brokerage said. According to estimates, in April, mutual funds alone, through a host of fixed maturity plans, restructured debts amounting to over Rs 10,000 crore from realty companies.
The last couple of months also witnessed sector leaders like DLF, Unitech and HDIL selling dwelling units although smaller ones are still struggling, the analyst said. This has enthused investors that the worst could be behind.
The third reason is lately some of the large firms sold part of their assets or backed out of ambitious projects. "Moves like these are helping realty firms generate cash and at the same time reduce debt,'' a sector observer said.
Some market players are cautious since they haven't forgotten how these stocks were hammered all through 2008. The rally also shows how Dalal Street reacts. "We go from extreme pessimism to practical optimism in 72 hours,'' said Anish Jhaveri, CEO, Antique Stock Broking. "The fact that some of the stocks had fallen over 90% was also over-reaction, on the other side,'' Jhaveri said.
The sensex on Wednesday shed 178 points to close at 11,953.
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