Real estate stocks rally on REIT buzz, Unitech Ltd, the biggest gainer

The rally in real estate stocks — driven by hopes of relaxed real

Photo: DNA India

estate investment trust (REIT) norms to be considered by markets regulator Sebi on Friday — saw Unitech shares jumping 15.75%, followed by HDIL (7.15%), Oberoi Realty (5.91%) and Sobha (4.22 %). 

All the four stocks were mentioned in this blog, the last week and Unitech Ltd, as expected gave one of the finest returns. 

The PTI reported a few days back that: Securities and Exchange Board of India (SEBI) is likely to consider a slew of norms pertaining to the real estate sector.  The regulator could consider making REITs "more attractive" to investors by permitting large investments from such trusts in under-construction asset. This has led to renewed optimism in the shares of real estate space. 

Now there is another counter, which did not rally much on last Friday and has the potential to cross Rs.10-12, in the short term, because of RBI's new debt restructuring plan. The CMP of the share is Rs.7.70 in NSE and Rs.7.73 in the BSE. The name of the scrip will be mentioned tomorrow in this blog. 

Regarding managing of corporate debts, the DNA India wrote on 27 May, 2016: 

It comes as a surprise that big corporations are finding ways to deal with debt and the banks are encouraging them to go ahead. As reported in this paper on Thursday, the economic research department of the State Bank of India has found that some of the big corporations are setting aside part of their assets to deal with debt. For example, Anil Ambani’s ADAG has set aside assets worth Rs.59,761 crore to manage a debt of Rs.1,24,956 crore.

That is a little less than 50% of the total debt. Reducing debt will improve not only the balance sheet of the corporation, but also that of the banks with their stressed assets. The banks, ICICI’s Chanda Kochhar has revealed in a media interaction, are encouraging corporations to sell off either core or non-core assets to bring down the debt burden.

Therefore, I feel that: as long as any company is able to service its debts, from internal accruals, I feel it is safe to invest in those companies, provided their financials are tracked regularly.  

In a significant development, in the domestic arena, the data released on last Thursday showed that India's CAD narrowed to $300 million (0.1% of GDP) in the March quarter (Q4) from $7.1 billion in the preceding quarter and $700 million in the fourth quarter of 2014-15.

The sharp decline in the deficit was attributed to a correction in trade deficit that shrank to $24.8 billion in Q4 from $34 billion in the December quarter and $31.6 billion in the March 2015 quarter. 

With inflation still below the RBI's comfort zone and the banks gearing up to take advantage of the new RBI guidelines, to clean the NPA, we could look forward for softer interest rates for some more time. Therefore, in such a situation, the companies, which are debt ridden and whose share prices were beaten down during the last few months, offer a good choice for punters, to rake in short term gains.