UBS Global Research is bullish on various sectors which will be driven by the existing housing cycle in India. The brokerage believes that India is in mid-cycle and the peak may come in next three years.
In developers' space, the brokerage prefers DLF Ltd., and Prestige Estates Projects Ltd. Developers' stocks have corrected 20% on year to date basis. It's bullish on Havells India Ltd. and Voltas Ltd. in consumer durable space, UltraTech Cement Ltd., and Ambuja Cements Ltd. in cement segment, and Polycab India Ltd., and KEI Industries Ltd. in wires and cables. In adhesive space, UBS Global Research prefers Pidilite Industries Ltd.
Developers' and housing finance stocks usually do better in the beginning of a cycle or mid-cycle. Companies in these spaces, along with consumer durables will have the highest volume growth among housing stocks. Margin expansion will be the highest for cement companies. In the up-cycle, bank credit growth will likely grow as the housing loans make up 18% of the system loans, UBS Global Research said.
"We estimate every 5% incremental housing growth to add 100 basis points to the system's credit growth," UBS Global Research said.
Market believes that up-cycle in the housing space lasts for seven-to-eight years, adjusted for external shocks. The present upcycle has started in 2021 and has multiple drivers — GDP growth, government spending in housing, interest rate cuts, and supply discipline, UBS Global Research said.
The NSE Nifty Realty index rose 1.41% to 888.30, the highest level since Feb 11. It pared gains to trade 0.88% higher at 877.90 as of 9:53 a.m., as compared to 0.75% advance in the NSE Nifty 50 index. The index has been rising for six days in a row.
Macrotech Developers Ltd., and The Phoenix Mills Ltd. were top contributors to the index. Godrej Properties Ltd., and Raymond Ltd. were top draggers in the Nifty Realty index.
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