Long & Short of the Market: Realty reigns, cyclicals climb and more

While the Street is gung-ho on the realty pack, on the back of a cut in stamp duty on registrations by the Karnataka government, real estate as a sector is sitting on very strong fundamental cues. Growing demand, liquidity, strong balance sheets of top realty companies, coupled with growing IT job prospects and compensations acted as a catalyst for realty companies in the Southern region, which is now becoming a national phenomenon across metros. Read more on realty space, valuation outlook on cyclicals, excess liquidity risks and much more in this week’s edition of ‘Long & Short of Markets’.

At the cusp of an upcycle, yet not cheap!

Cyclicals have been in the forefront of this long bull rally and most cyclicals are overvalued despite long order pipelines which only unlocks the upcycle. Dalal street veteran Sandip Sabharwal opines that the best value for cyclicals is available when everyone has a lot of concerns around them regarding growth, margins and working capital. At present prices, valuations aren’t sustainable.
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Beneficiaries of rapid vaccine drive

Reopening trades are back in focus as India’s rapid vaccination drive has boosted the outlook for contact-intensive sectors. One of the stocks set to benefit from this trend is India’s largest airline company, . A spike in air passenger traffic by 34% month-on-month in August is one of the key factors.
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The true test of a soaring economy

Looking for signs of a booming economy? You need to look at the realty and infrastructure sector’s growth, opines veteran fund manager Mihir Vora. He says, “no country in the world has been able to grow at high single digit or lower double digits without the infrastructure and real estate sectors simultaneously moving up.” Hence, he believes, realty and infra boom is crucial for India’s high growth in the medium term.
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Realty’s much awaited turnaround!

Realty is at the cusp of a multi-year bull run. Increasing support from policy fronts such as duty cuts on registrations, low borrowing costs, excess liquidity have aligned perfectly for a structural upcycle. Amid these conditions, listed stocks are focussing on cash flows and profitability rather than piling up land banks and increasing projects without proper due diligence, which is a good sign according to Dalal Street veteran, Dipan Mehta.
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Risk of excess liquidity

Liquidity was the ventilator on which the economy and stock market recovered from the pandemic shock in March 2020 and it’s still the driver for markets. Banks on the other hand are reeling under margin pressure from excess liquidity, said SBI Economic Research report.
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