The Real Buy

The plot below displays CNX Realty and Nifty.

The plot below displays the relative performance of CNX Realty vs Nifty.

The red line illustrates the relative performance of CNX Realty Index vs Nifty.
Realty sector had periods of outperformance compared to Nifty from mid of January till end of April. However, since May onwards we can see that realty sector has consistently underperformed Nifty with some outperformance seen in recent past.
The outperformance in recent past can be an indicator of performance reversion, as after a multi months of under performance, the sector is bouncing back.
15 out of 20 components of the sector are having ‘total positive signals’ (Both Price and Jiseki positive). This suggests that the majority of the real estate sector is in a BUY mode.
Most of the quarterly Jiseki performance rankings are below 50. 11 components are below 20 percentile performance rankings. This suggests that while the sector momentum is suggesting a BUY, the stocks remain at attractive valuations.
Recommendations
In the Real Estate sector, we recommend to buy Mahindra lifespace, Peninsula land.We are keeping a watch in Phoenix Mills, Godrej Properties and Oberoi Realty. Below we discuss these stocks based on their Jiseki cycle and rankings. The proprietary ranking methodology looks at numerous performance criteria such as price performance, relative out performance, Jiseki rankings.
Mahindra Lifespace Developers (BOM:532313)
Mahindra Lifespace is ranked 20th based on Orpheus proprietary ranking methodology, which makes it the best performer in the sector. The stock has a positive price trend and positive Jiseki cycle since the last 101 days generating approx 23.5% return for the period.
From a quarterly Jiseki performance ranking perspective also the stock is around 30 percentile which suggests that stock is still undervalued.
ORMI methodology looks at buying the worst negative outliers as they are prone to a positive reversion. The P/E ratio for the stock is low at 12 (undervalued) compared to its peer group (average 23) while it shows a ROE of 10% which is higher compared to its peers.
Peninsula land (BOM:503031)
Peninsula Land is ranked 19th based on Orpheus proprietary ranking methodology, which makes it the second best performer in the sector. The stock has a positive price trend and positive Jiseki cycle since the last 146 days generating a 81.2% return for the period.
From a quarterly Jiseki performance ranking perspective also the stock is below 20 percentile which suggests that despite the intermediate multi week upside, among the BSE 500 stocks Peninsula Land is still undervalued.
The P/E ratio for the stock is low at 6.2 (undervalued) compared to its peer group and it shows a highest dividend yield.
Phoenix Mills (BOM:503100)
Phoenix Mill has a positive price trend and positive Jiseki cycle since the last 49 days generating a 7.33% return for the period. From a quarterly Jiseki performance ranking perspective also the stock is around 30 percentile which suggests that stock is still undervalued.
Godrej Properties (BOM:533150)
Godrej Properties has a positive price trend and positive Jiseki cycle since the last 55 days generating a 7.1% return for the period. From a quarterly Jiseki performance ranking perspective also the stock is around 30 percentile which suggests that stock is still undervalued.
Oberoi Realty (BOM:533273)
Oberoi Realty has a positive price trend and positive Jiseki cycle since the last 49 days generating a 1.17% return for the period. From a quarterly Jiseki performance ranking perspective also the stock is around 35 percentile which suggests that stock is still undervalued.
Technical Review
We are positive on Mahindra Lifespace Developers as the prices continue to move up in a rising channel. Long term resistance level for stock is 500.
Peninsula Land also seems to be a good buy. We can see a bullish flag formation here. The flag pole followed by lower highs and lower lows suggests a pause in dynamic trend. Prices are expected to take off again in upward direction. Above 70 we remain positive.
We are keeping a watch on Phoenix Mills. If primary resistance of 220 is crossed prices are expected to go up. We are also following Godrej Properties and Oberoi Realty. If prices of these stocks do not breaks their inclining support level at 620 and 270 respectively, then uptrend should continue.
Summary
We have 15 running total positive (both Jiseki and price signal positive), 2 running total negative (both Jiseki and price signal negative) and rest neutral (both Jiseki and price signal non-confirming).
Positives (15)
There are 15 components that are positive on both price and Jiseki cycle. 9 out of 15 positive components made a profit above 5% in their respective signal holding period. Peninsula land, Prestige Estates and Mahindra Lifespaces made profit of approx 70%, 31% and 25% in their respective signal holding period.
Negatives (2)
There are 2 components that are negative on both price and Jiseki cycle. MVL Limited showed a loss of approx 10.5% in 42 days of signal holding period and approx 88% in a year. Suntech Realty also showed a yearly loss of around 12%.
Non-Conforming (3)
This leaves us with 3 components that have a non-confirmation between price and Jiseki cycle filters.

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Indexing: The INDIA 30 Orpheus Risk Management Index (ORMI) is based on proprietary algorithm.
The indices values that are disseminated today are broadly based on market capitalization methodology. Market capitalization methodology has been challenged globally for a few broad reasons. 1) As an asset strengthens it is given more weight 2) As an asset weakens it is given lesser weight. This on one side captures momentum but on the other side suggests investors to focus more on growth compared to value. This increases portfolio risk when market growth slows down or reverses, as has been the case since 2007. When markets contract, the erstwhile top performers push into red for extended period of time causing large drawdowns and emotional pain.
The India 30 Index is based on the above extreme reversion idea i.e. outliers tend to reverse, which suggests that investing is about value picking and extremes are prone to reversion. Our Index extends and fine tunes the idea first mooted by De Bondt and Thaler in their 1981 paper suggesting that 3 year worst losers portfolio tends to outperform the 3 year best winners portfolio.
Coverage India: CNX100, BSE500 traded stocks and Indian Indices.
Ayushi has done her masters in economics from Delhi School of Economics and then completed her Post-Graduation in Finance from National Institute of Securities Markets. She completed her graduation in Economics from Lady Shri Ram College. A keen econometrician, Ayushi enjoys financial modeling and risk management.