BSE Realty index rebounds from all-time low

The BSE Realty index surged 6.39% to 2,846.50, on hopes of reduction in interest rates on home loans.

The index bounced back from a record low of 2,436.55 struck earlier in the day

As per provisional closing, the BSE Sensex lost 270.95 points or 2.51% to 10,538.17 in choppy trade.

DLF (up 2.96% at Rs 309), Unitech (up 5.7% at Rs 89.85), and Housing Development & Infrastructure (up 6.14% at Rs 127.85), rose.

The BSE Realty index hit an all time high of on 13848.09 on 8 January 2008

Demand for real estate has decreased by nearly 25-30% in the country over the last 18 months, when home loan rates soared from an average of 7% to as high as 12-13%. The home loan rate in India is among the highest in the world and analysts expect it to be reduced by at least 100 basis points post the cut in cash reserve ratio by the Reserve Bank of India.

On 15 October 2009, the Reserve Bank of India (RBI) slashed cash reserve requirement (CRR) for banks by 100 basis points to 6.5% with effect from 11 October 2008, which will release Rs 40,000 crore into the banking system to boost liquidity. The cash reserve ratio is the amount of deposits that a bank must set aside with the central bank.

Earlier, on 11 October 2008, RBI cut CRR, by 150 basis points to 7.5% to infuse liquidity into the system. That cut injected liquidity to the tune of Rs 60,000 crore into the system.

The BSE Realty index had underperformed the market over the past one month till 15 October 2008, declining 38.28% as compared to the Sensex's decline of 20.12%. It had also underperformed the market in the past one quarter, falling 40.59% as compared to the Sensex's decline of 14.73%.