Nifty Realty: Signs of potential reversal?

The Indian equity markets have experienced persistent volatility over the past year, which has been largely driven by the relentless selling of foreign institutional investors (FII). This has resulted in a challenging environment for equities, with significant fluctuations in market sentiment. The Nifty Realty Index has been no exception to this trend.

Over the past 12 months (market close as on Feb 21, 2025), the Nifty Realty Index has significantly underperformed broader market benchmarks. While the Nifty 50 delivered a modest gain of 3.9%, and the Nifty 500 posted a return of 3.5%, the Nifty Realty Index declined by (-5.5%), reflecting its relative weakness within the broader market structure.

The turbulence has intensified in 2025, with heightened volatility and selling pressure continuing to weigh on equities. Year-to-date (YTD), both the Nifty 50 and the Nifty 500 have registered negative returns of (-3.5%) and (-7.3%), respectively.

The Nifty Realty Index, however, has faced an even steeper decline, posting a significant loss of (-17.8%) over the same period. This continued underperformance highlights the sector's vulnerability amid prevailing market conditions. Despite these headwinds, emerging technical factors suggest a potential shift in momentum for the real estate sector. As we delve deeper into the evolving market dynamics, it is crucial to assess whether the worst is behind us and whether the Nifty Realty Index is poised for a meaningful recovery.

Nifty Realty Index: Signs of potential reversal emerging

The daily chart of the Nifty Realty Index indicates that the strong upward trend observed for several months lost momentum after peaking at 1,157.35 in June last year. Following this, the index entered a corrective phase, repeatedly testing this level before slipping below key moving averages. Signs of a potential reversal have emerged in recent weeks, which are

• The latest phase of decline has led to a bullish divergence between the RSI and price action. While the index formed lower lows, the RSI failed to follow, suggesting weakening downside momentum.

• Additionally, relative strength is showing signs of improvement, with a minor double-bottom formation that has halted its decline and now appears poised for an upward move.

These technical signals indicate a potential shift in sentiment, warranting close monitoring for further confirmation of trend reversal.

The weekly chart of the Nifty Realty Index reveals that the thirteen-month rally, which began in May 2023, culminated in a peak in June 2024. Following this, the index entered a corrective phase, eventually finding support at the 100-week moving average (MA), currently positioned at 815.

A bullish candle has emerged at this support level, reinforcing the 100-week MA as a critical support zone. This strengthens the probability of a sustained rebound, provided the index holds above the 800–815 range. A decisive move above this level could validate a potential trend reversal, warranting close monitoring for further confirmation.

Nifty Realty: Heavyweights and sector influence

The Nifty Realty Index comprises 10 constituent stocks, with DLF and Godrej Properties (GODREJPROP) holding the highest weights. These two stocks account for 37.5% of the index, making them key drivers of its movement.

A deeper look at the index composition reveals a strong concentration at the top. The four largest constituents—DLF, GODREJPROP, Macrotech Developers (LODHA), and Phoenix Mills (PHOENIXLTD)—collectively represent 66.5% of the index. Given this high concentration, price movements in these stocks significantly influence the broader Nifty Realty Index, making them crucial to watch for any sector-wide trend shifts.

Nifty Realty stocks indicate potential upside

Several stocks within the Nifty Realty Index exhibit technical signals, which could suggest the potential for an upward price revision.

Key constituents such as DLF, Godrej Properties (GODREJPROP), Oberoi Realty (OBEROIRLTY), and Prestige Estates (PRESTIGE) are demonstrating bullish divergences on leading technical indicators. Meanwhile, stocks like Macrotech Developers (LODHA) and Phoenix Mills (PHOENIXLTD) are showing notable improvements in Relative Strength (RS) against the broader market.

Given the reversal process often involves periods of consolidation, some short-term sideways movement cannot be ruled out. However, the overall technical structure suggests a meaningful recovery could be underway. Close monitoring of technical confirmation signals will be key in assessing the sustainability of this potential rebound.