Shares of real estate companies witnessed selling pressure on Wednesday on concerns the inclusion of bulk diesel price in wholesale price index (WPI) may add upward pressure on headline inflation and lessen the likelihood of cut in interest rates going forward. The news about HDIL vice-chairman and managing director Sarang Wadhwan selling a part of his stake to fund a land acquisition also acted as a catalyst.
Media reports said the government is planning to include the bulk price of diesel fuel in its calculation of wholesale price index (WPI) as early as February that could put an upward pressure on the headline inflation. However, the timing of the inclusion of bulk diesel prices in WPI is still uncertain as it depended how quickly oil companies made their new price data available. WPI data for January will be released on February 14. Diesel has a 4.67% weighting in the index.
The Reserve Bank of India will meet on January 29 to decide on policy rates. Market is expecting RBI to cut key policy rates by 25 basis points (bps).
The BSE Realty index was the biggest loser on Wednesday. It closed the day at 2182.67, down 52.34 points or 2.34%. Most other interest rate sensitive indices also witnessed selling pressure on concerns surrounding cut in interest rates next week. BSE Consumer Durables and BSE Auto indices fell nearly 1%. The fall in index heavyweights led to fall in real estate stocks on Wednesday. DLF and Unitech lost 0.7% and 1.6%, respectively, whereas HDIL was the biggest loser among the pack after one of the promoters sold stake in the company.
Share of HDIL plunged 14.33% or R16.10 to R96.25. HDIL is the worst performing stock in BSE 500 index, Bloomberg data show. The scrip has dropped nearly 30% after touching its 52-week high of R135.40 in February 2012.
As per BSE, HDIL vice-chairman and managing director Sarang Wadhwan sold 5 million share for R57 crore in a secondary market sale on Tuesday, thereby, reducing his stake to 0.99% from 2.19%. Speaking to FE, Wadhawan said, ?The sale was to fund the acquisition of a land parcel purchased by HDIL a year ago. The amount is towards payment of a tranche that was due in the next few days.?
Analysts said real estate stocks may witness profit booking based on the recent outperformance on hopes surrounding cut in interest rates, reduction in debt and improvement in property sales. In the last six months, shares of DLF ? India’s largest real estate company ? has gained around 40%, while Unitech has surged 120%.
