The Nifty Realty Index is trading at its biggest discount to the Nifty 50 Index in two years amid liquidity crunch in the credit market.
The 10-stock gauge's price-to-earnings multiple is at a 12 percent discount to that of the benchmark Nifty Index, according to Bloomberg estimates. That's the highest gap since November 2016.
The gauge has tumbled nearly 35 percent so far this year as shares of real estate companies fell between 4 percent and 64 percent. A series of payment defaults at IL&FS Ltd. in September only added to the sector's woes. The Realty Index dropped nearly 17 percent in the last three months.
Construction finance is an essential component for real estate developers who are facing declining demand and lower cash flows, according to a report by brokerage Karvy. The liquidity tightening, it said, increased the funding costs.
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