real estate stocks: We are at the beginning of a virtuous cycle in real estate: Anshul Saigal



IN the property the sector presents an interesting opportunity for investors in the next 2-5 years, says Anshul Saigal of Kotak Mahindra AMC. Edited excerpts:

How do you view the general market sentiment? How do we compare with common macros right now and with the start of reporting season, what are the expectations?
As the famous market saying goes, history does not repeat itself, but rhymes. We need to go back in history and take a look at what happened from 2003 to 2007. Sensex grew from 3000 to 21000. But the entire rally was a one-way rally. There were fixes in between. Two things were going on in conjuncture. The first is liquidity, the second is profit growth. Both of these things exist today.

We have seen significant growth in liquidity and profits in the market. At least the last three quarters show that revenues have grown well. At the same time, if we see speed bumps, we should not be surprised. The proportions may differ, but a correction in the market is always useful.

As for the long-term trend, we believe that the trend has not changed because both profit and liquidity are present. Due to the estimates, a correction can be beneficial because weaker hands can leave the market. It will always be best to take a short break so that the market can continue the next phase of growth. In this regard, I would say that this is a market in which you need to be careful. We have seen a huge rally over the past year and there will be small pockets of value, but be careful as the market as a whole will be a little frothy.

Could you please add fresh items to real estate shares?
The last cycle taught us that focusing on good balance sheets and staying with sector leaders and quality businesses will protect you in the event of a market downturn. Of course, this means that you are giving away a little of the profit, but this is okay to prevent flaws from showing up. In this context, I would recommend staying in quality companies with strong balance sheets.

The real estate sector is a great opportunity. Inventories of completed construction are at their lowest in many years, and the number of construction workers in various cities has decreased by 50-70% due to various regulatory measures taken by the central government. Buyers’ interest in this sector is growing. The availability is the same as in 2003.

The first stage in the growth of sales will be end users, which will lead to a sharp increase in price activity and attraction of investors. We are at the beginning of the cycle of grace. This is an interesting sector to look at in the next 2-5 years.

What are your expectations from this reporting season? Which sectors will lag behind?
The next few quarters will be interesting. We will have a low base this quarter due to the impact of the second wave of Covid. Last year there was complete isolation, so this will be a low base quarter. In the future, we will have a higher base. As a result, we will have to be more cautious about earnings in the next quarter and next quarter. This quarter, due to the low base in many sectors, we will see high profits. The IT sector has already started a fairly solid foundation. We think the cement will be slightly weaker compared to the previous quarter, but on an annualized basis, the cement should be strong. In general, building materials must be durable. Banking and finance will be slightly muted during this time due to Covid. Most banks and financial institutions have stalled growth.


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