BSE India launches New Real Estate Index

The Bombay Stock Exchange (BSE), founded in 1875 with 318 members, is the barometer of the Indian stock market. Located at Dalal Street in the central business district of Mumbai, the stock exchange accounts for a market capitalization of nearly USD 1 trillion. In 1986 BSE introduced SENSEX (SENSitive indEX) comprising of 30 well established Indian companies with the base year 1978 – 79. It is one of the indices the financial world tracks regularly. Since September 2003, “free float market capitalization” methodology is followed. In full market capitalization methodology, the total market capitalization of a company, (including those held by promotors, government agencies etc.), is taken into consideration for computation of an index. But in free float methodology, market capitalization is computed as the proportion of total shares issued by the company, which are readily available for trading in the market. It normally excludes promoters' holding, central/state governments’ holding, strategic holding and other locked in shares, which cannot be traded in the market. BSE has introduced several indices so far. These include: BSE BSE BSE BSE BSE BSE BSE BSE BSE BSE BSE BSE BSE BSE 100 200 Dollex 200 500 PSU Midcap Small cap Bankex Teck Auto Healthcare Fast Moving Consumer Goods Consumer Durables Metal

BSE 100 comprises of 100 major stocks listed at five major stock exchanges in India at Mumbai, Kolkata , Delhi , Ahmedabad and Chennai. The mid cap and small cap indices represent relatively smaller companies. The teck index includes IT, media and telecom stocks.

Real estate prices, both residential and commercial, have soared up in the last few years in India due to huge demand. Very strong growth has been witnessed in this sector. Many domestic and international investors have been attracted by the Indian real estate industry. More growth is anticipated in the sector since the real estate market capitalization in India is 4.2% where as global norm is 15%. Several real estate companies have come up with IPOs. The Indiastreet analyzed DLF, HDIL IPOs and Indiabulls Real Estate stock in various articles. On July 9, 2007 BSE had introduced yet another index – The BSE Realty Index comprising of real estate stocks. The base year for the index is 2005 and base index value is 1000. Like the Sensex, this index is also computed using free float methodology. 11 scrips are included in the Realty Index, representing about 95% market capitalisation of real estate development companies in BSE 500 index. On July 9, the index value was reported to be 7333.97. The following table shows the list of 11 companies, their free float market capitalization and weightage in the Realty Index. Company Free float market capitalizati on (Rs. Crores) 14,542.01 12,773.71 5,639.65 1,375.80 1,213.38 1,096.16 1,011.35 890.13 725.06 707.12 489.84 Weightage (%) 35.94 31.57 13.94 3.40 3.00 2.71 2.50 2.20 1.79 1.75 1.21

DLF Limited Unitech Limited Indiabulls Real Estate Limited Parsvnath Developers Limited Ansal Properties & Infrastructure Limited Mahindra Gesco Developers Limited Sobha Developers Limited Anant Raj Industries Limited Phoenix Mills Limited Peninsula Land Limited Akruti Nirman Limited Total free float market capitalization: Total market capitalization:

Rs. 40,464.21 crores Rs. 179,499.70 crores

The following table gives the yearly historical stock prices of the constituent stocks. (Source: BSE web site, www.bseindia.com) Company AKRUTI ANANTRAJ ANSALINFRA 1 DLF GESCOCORP IBREALEST PARSVNATH PENINLAND PHOENIXLTD 2 SOBHA UNITECH
1

31/03/04

31/03/0 5 15.82

31/03/0 6 693.50 721.30 462.20

31/03/0 7 405.85 1103.45 527.50 568.30 298.10 259.00 371.70 1603.50 800.70 387.35

Current 499.90 1299.0 0 311.45 590.45 558.20 501.40 383.25 484.75 2009.7 5 955.00 542.40

19.70 21.05

111.95 122.45

34.25 1134.15

132.40 6105.00

661.25 976.25

3

85.05

337.35
2

2785.45

Price adjusted in November 2006 2005 3 Price adjusted in June 2006

Price adjusted in December

ANSALINFRA, GESCOCORP, PENINLAND and UNITECH have performed very well in the bull market. GESCOCORP touched a high of 1300 in May 2006 but has fallen considerably since then. Today’s intraday chart of Realty Index is plotted below, with Sensex by its side as a comparison.

Source: BSE web site www.bseindia.com http://groups.google.com/group/theindiastreet/web/REALTY .JPG

Today, the sensex has lost 99 points or 0.66% whereas the realty index has gained 249 points or 3.38%. BSE Metal index was the next highest gainer with 162 points or 1.48%. The BSE IT index lost 168 points or 3.34%. However, considering BSE Sensex with base year 1978 – 79 and base value of 100, it has appreciated nearly 150 times in 28 years. Realty index though, has appreciated nearly 7.6 times in just about 2.5 years. DLF has nearly 36% weightage, Unitech has 31.5%, Indiabulls Real Estate has about 14%. Unitech has appreciated considerably (more than 11 times) in the last 2.5 years. DLF and Indiabulls Real Estate are relatively new issues. Conclusion: Sectoral indices (like healthcare, auto, metal, IT, realty etc.) are useful in analyzing how a particular industry or sector has performed over a period of time. Since the constituent stocks are chosen from the same industry, it presents a clearer picture about the sector than the overall index. Real estate industry is being projectd for further growth. We can anticipate that the realty index too performs well in future. Suggested Readings: http://www.theindiastreet.com/2007/06/dlf-ipo-overview-dlf-universallimited.html http://www.theindiastreet.com/2007/06/hdil-ipo-expected-to-bewinner.html

SUNDARAMURTHY VADIVELU LABELS: BSE, SENSEX, REALTY INDEX, SECTORAL INDICES, DLF, UNITECH, INDIABULLS REAL ESTATE, MAHINDRA GESCO, ANSAL INFRASTRUCTURE