Realty index on a roller coaster ride, but speculators ruled out

Realty index on a roller coaster ride, but speculators ruled out
The Financial Express, April 8, 2009, Page 4

The last few days of March saw extreme volatility in realty stocks, which experts have attributed to profit booking, trading moves, global cues and macro economy moves.

On March 20, the realty index was -4.1%, while it went up to 6.3% on March 25. A day later, it went down to -4.54%. After a marginal recovery to 1.23% a day later, it slipped again on March 30 to -7.24%, only to regain ground marginally on March 31 when it went up to 2.93%.

“This movement is certainly not because of speculators, since they are very unlikely to sell off their stocks, incur a loss and exit the market”, Shobhit Agarwal, joint managing director, capital markets, Jones Lang LaSalle Meghraj, pointed out. Hitesh Agarwal, head of research, Angel Broking said the swings were mostly due to trading moves. DR Dogra, deputy managing director, CARE Ratings, reiterated that investors are not responsible for any movement—positive or negative—in the market.

Dogra also said the movement of the realty index is not totally unrelated to the movement of the sensex. “The month of March saw a rise of 13% in the BSE realty index at 1560.83 points, with a surge in stock prices of realty majors like DLF, Unitech, HDIL and Mahindra Life. There have also been minor declines in the realty index in March, mainly because of the fall in Sensex”, Dogra added.

“Global markets are in sync right now. In these uncertain times, one is watching the other’s move. So a rise or fall in stocks in the US market is likely to affect stocks here,” explained Shobhit Agarwal.

Another reason for the random movement of stock prices is due to profit booking. “The fall in the realty index on March 26 can be attributed to profit booking due to considerable rise in index on the previous trading day”, Dogra added.

Overseas factors have also been responsible for a rise in the stock prices of realty index. Dogra believes that, oversubscription of rights issue of CapitaLand, a Singapore-based company, has led to a rise in realty stocks in India.

During March-end, stocks become volatile, while at other times, the impact is not so much. But at a time when the realty index rises and comes down very sharply, the year-end phenomenon is also very exaggerated and pronounced.