While Nifty hit new highs during the June series, Bank Nifty stayed on the losing side
(see chart). However, some action is happening in the banking space now and analysts have started watching it closely. “Due to over optimism in the market now, I think we are in the last leg of the current rally (before the market makes a healthy correction of 7-10%) and most probably, this last leg will be triggered by the banking sector,” says Mehul Kothari, AVP – Technical Research – Anand Rathi Shares & Stock Brokers.
(Narendra Nathan/ET Bureau)
Sector update: Housing
Not much scope for housing prices to soar
Housing prices appeared to be recovering in the fourth quarter of 2020-21 as the economy emerged gradually from the pandemic. Growth of 2.7% in the RBI house price index (HPI) looked like a stepping-stone in the upward direction as it rose from 1.1% in July-September to 2.2% in October-December of the year. However, the second wave that came in April disrupted the sector as it has affected livelihoods and spending power as well as diverted attention to health for majority of households. While there can be some pent-up demand emerging during the year, the impact on prices in 2021-22 would tend to be moderated.
In metro cities, the highest growth was recorded in Bangalore at the rate of 15.7% followed by a 1.6% rise in Kolkata. The growth recorded in Bangalore, which is known to be an end-user driven market, seems to be largely on account of the growth in work-from-home culture. While Mumbai Metropolitan Area (MMR) is estimated to be the most expensive with regard to property prices, it registered a growth rate of 0.8% only. This could be due higher inventory of housing property amidst limited demand. Meanwhile, Delhi and Chennai de-grew at the rate of 0.8% each. Amongst non-metro cities, the growth in index varied from an 8% increase in Kochi to a de-growth of 3.5% in Jaipur. The RBI-HPI shows an interesting trend of continuous decline in growth rate of housing prices from 2014-15 which witnessed an increase of 16.1%. Growth rate came down to 3.4% in 2018-19 and further to 2.2% in 2019-20.
Going forward, the movement in HPI would be influenced by demand side factors as well as inventory levels. Reliefs provided on the supply side like stamp duty or other facilities by the government for the real estate sector as part of the Atmanirbhar package will also influence the prices to an extent. But more importantly the cost factor will weigh heavily on this sector.
The pandemic has impacted the livelihoods of several households in terms of expenditure incurred on treatment as well as preventive medication. Focus on savings rather than investing in big ticket property will work towards moderating demand. There was already an overhang of debt burden in terms of the moratorium that was provided last year. Therefore, it would be interesting to see how demand plays out, especially in the mid segment. The higher end prices are relatively less influenced by these generic factors while the affordable segment at the lower end have their thresholds.
A concern here is the spike in global commodity prices which has been witnessed even in India. Cost of construction has gone up as steel, cement, copper, aluminium products, sanitary ware etc have been increasing. This will tend to put pressure on the cost of the project which can pressurize prices. The real estate sector must work towards this cost transmission which will not be easy when demand conditions are low.
Therefore, there are countering factors at work and our expectation is that for the year, the ability of the sector to push prices beyond 2-3% may not be possible. This too will not be evenly spread across cities and the larger cities like Mumbai, Delhi, Kolkata and Chennai could remain relatively flat with virtually no growth.