Gautam Shah predicts cool-off in real estate rally, recommends booking profits

Gautam Shah, Founder and Chief Strategist of Goldilocks Premium Research believes real estate stocks are in for a large cool-off and recommends booking profits.

"There has been a big breakout in real estate after being stuck in a wide range for over 10 years. Such big breakouts can have a huge impact, which we have seen in the rally over the last 18 months.  But I believe now it's overdone. Chances of a large cool off is pretty high and we are recommending taking profits. Expect a resting phase that could last a few weeks before the next leg up," he said.

The Nifty Realty Index risen close to 100% over the last year.  In just the past month, the index has gained over 14%.

On the broader market too, Shah believes the 'exuberance is priced in'. While the bull market is still intact, these are levels where the market cannot gallop. He expects a rotational correction from here on where select stocks and sectors will rally while others lag.

“Having seen the 2003, 2007 bull market, 10% fall was quite normal but in today’s world, a 5% is 10%. So in that sense, if the Nifty were to lose about 4-5% at any point of time, it should be considered normal and very healthy,” he said.

With very high chances of a pullback, Shah advises investors to exercise caution, be low on leverage, and conservative.

Some of the sectors that Shah still prefers are information technology (IT), pharma, metals, and banking. He expects the strength in HDFC Bank and SBI to support the market.

However, he does not see current market conditions as favorable for fresh entry into the defence sector.

“While defence might be a great story from a 3-5 year perspective, if you are looking to enter fresh, these are not levels. If somebody has bought it at lower levels, take profits,” he said.