Realty stocks' rally may hit valuation hurdle

New investors should wait for correction to enter the sector, say analysts

- NIKITA VASHISHT

Shares of real estate firms have been outperforming over the past year. The rally, analysts say, may hit roadblocks in the near term amid stretched valuations, even as the long-term prospects for the sector remain ebullient.

"Most of the positive news flow is already in the price. Hence, investors sitting on hefty profits may partially cash out at current levels," suggests V K Vijayakumar, chief investment strategist at Geojit Financial Services.

New investors, meanwhile, he said, could wait for corrections to enter the sector as rich valuations make the pack unattractive from a risk-reward perspective.

Over the past year, the Nifty Realty index has soared 102.3 per cent on the National Stock Exchange, as against the 19 per cent surge in the benchmark Nifty 50 index, ACE Equity data shows.

Individually, the shares of Prestige Estate Projects have zoomed 190 per cent, while those of Brigade Enterprises, DLF, Macrotech Developers and Sobha have soared between 107 per cent and 118 per cent, respectively.

Real estate investment trust (REIT) stocks, however, fell in the range of 1 per cent to 17 per cent.