This story is from December 12, 2007

Investors rejig sectoral mix

Sherna D'Mello / TNN / Dec 12, 2007, 01:17 IST

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The markets were bullish not just on frontline stocks, capital goods and power sectors were on the shopping list of investors, traders and institutions alike.

MUMBAI: A few months ago the sensex was growing in leaps and bounds, barely even taking a breather as it moved from 16K to 20K in just over a month. And leading the rally were counters like Reliance Energy, BHEL, L&T and RIL.
Over the past year these stocks have given phenomenal returns with the REL share price increasing by 269%, L&T by 198%, RIL up by 132% and BHEL up 110%.And the markets were bullish not just on frontline stocks. Capital goods and power sectors were on the shopping list of investors, traders and institutions alike.
During the last month, however, things have changed. Among BSE's sectoral indices, capital goods, power and PSUs are the ones that have given the lowest returns of just about 3% each. And in a month of sluggish trade for the sensex the list of its top 10 gainers doesn't include any of the earlier market favourites.
Real estate has emerged as the sector giving the top returns, with the BSE Realty index rising by 20.5% over the past month. Some of its constituent scrips like Unitech, HDFC, DLF, Ansal Infra and Omaxe have seen sharp rallies. So is there a new market leader or will the capital goods and power make a comeback after a temporary setback?

"Many capital goods and power stocks had run up a bit too much during the earlier rallies, beyond their fundamentals. The rise in stock price was based on expectations of future performance. Some power stocks in particular moved up on the basis of stories that will take about four to five years to unfold," said Karvy Stock Broking VP Ambareesh Baliga.
To make up for the frenzy, there's a lull in these counters, market players said. However, they feel that in the run up to the third quarter results at the end of December capital goods counters at least will come back into focus and deliver good returns.
Analysts say the real estate story depends on prevailing interest rates. With Fed cutting key rates, expectations are high that RBI will follow suit. "If interest rates fall then globally and in India real estate comes into focus. In Mumbai builders are bidding aggressively for land and the recent repeal of the Urban Land Ceiling Act is also boosting the sentiment," said Sharekhan research head Sandeep Nanda.

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