Realty, consumer durables top stock market gains this year

Realty and consumer durables have been the top gainers among sectoral indices in 2017, as investors shrugged off worries arising from the government’s shock scrapping of all high-value banknotes overnight in November.

Year-to-date, the BSE Realty index and BSE Consumer durables index, have gained 52% and 38%, respectively.

The realty index has been riding high on the back of lower mortgage rates, implementation of Real Estate (Regulation and Development) Act, or Rera from May 1, and the thrust on affordable housing by the government at the Union budget.

Indiabulls Real Estate Ltd, DLF Ltd and Godrej Properties Ltd are the top gainers with 110%, 67% and 53% gains so far this year, respectively.

“Implementation of Rera – the sector will become more transparent, and it could lead to massive consolidation in the sector. The push will be towards organized sector from unorganized one,” said Parikshit D Kandpal, senior analyst, HDFC Securities

“Government’s push on affordable housing through subvention and discounts through various schemes, and lower mortgage rates are also positive. The expectations of a recovery in economic growth and income levels are also expected to spur demand,” added Kandpal

The valuations look expensive for the realty sector at this point. BSE Realty index trades at 23.15 times fiscal year 2018 earnings, compared to a five-year average of 13.28 times.

For the consumer durables sector too, the shift to organised sector seems to be a huge positive.

“The whole thrust to organised sector from organised one on the back demonetisation, and upcoming implementation of GST have boosted the listed players in sectors such jewellery, air conditioner companies,” said Gautam Duggad, head of research at Motilal Oswal Securities Ltd.