Nifty Realty rises to all-time high: Will real-estate boom continue?
What's the story
Nifty Realty index gained 2% today, hitting a record high of 959.1.
While the broader market indices was trading in the red, realty stocks defied the trend after Morgan Stanley's upward revision of target prices for several key players in the sector, including Prestige Estates and Godrej Properties.
Nifty Realty index has experienced a significant surge this year, recording an impressive growth of over 21%.
This performance stands in stark contrast to the benchmark Nifty's modest rise of just 3%.
Rating revision
Morgan Stanley revises ratings for realty stocks
Morgan Stanley's team of analysts have upgraded their rating for Godrej Properties from "equal weight" to "overweight", and increased the target price from ₹2,050 to ₹2,500.
This revision was driven by strong pre-sales momentum.
Similarly, Macrotech Developers saw an increase in its target price from ₹960 to ₹1,050, while maintaining an "equal weight" rating.
Prestige Estates's target price was also raised from ₹1,300 to ₹1,400 and was given an "overweight" rating.
DLF rating
DLF downgraded despite target price increase
In contrast to other realty stocks, DLF saw a downgrade from "overweight" to "equal weight", despite its target price being increased from ₹770 to ₹900.
Morgan Stanley's analysts predict that the real estate sector's superior performance will be driven by pre-sales momentum.
They anticipate that growth in FY25 will moderate to between 10-20% year-on-year (YoY), a decrease from FY24's actual growth of between 30-40%.
Market shift
Market shift expected toward return on equity
As pre-sales momentum begins to slow down, analysts predict that the market will likely shift its focus toward return on equity (RoE).
In this context, Macrotech and Oberoi Realty are projected to perform well. Prestige Estates and Godrej Properties are expected to lead in terms of YoY pre-sales growth.
Meanwhile, Macrotech Developers and Oberoi Realty are anticipated to excel in terms of RoE.