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Since the muhurat session on Diwali, when the BSE sensex closed at an all-time high of 21,005, software stocks have emerged as the safest bet, safer than even traditional sectors like FMCG and pharma, while real estate stocks were the worst performers. The data on the performance of sectoral and other indices since Diwali shows that BSE’s IT index has gained nearly 3%, while the real estate index, which is at the other end of the spectrum, has lost 40.4%. The other laggards on the sectoral front are banking with Bankex down 20%, capital goods index down 19%, and PSUs down almost 18%. Compared to these indices, the sensex and the NSE nifty are both down by 12.7% and 12.8% respectively. Even when compared on a monthly basis, the realty index is down nearly 22%, while the IT index has lost 6.7%%, and the sensex 10.6%.

Market players say while a number of headwinds that the real estate sector is facing are the reasons for the current investor apathy towards realty stocks, the low level of institutional holding in this sector compared to sectors like IT and banking, also affected the sector’s performance. A recent sector report by Edelweiss Securities said that although the demand for housing in India continues to be robust, rising interest rates, increase is residential prices in some cities crossing the peak levels seen is 2008, and rising construction costs will continue to be dampeners for the sector.

On the other hand, software stocks are rising because of strong quarterly results, improving economic situation in the US, the largest export market for most of the leading Indian IT services companies and also the depreciation of the Indian rupee against other major currencies, market players said. Brokers and dealers also said that the currently sliding phase of the market has also unnerved retail investors as memories of 2008 and 2009 are still fresh, and they are in hurry to sell.This is clear from the fact that BSE small-cap index has lost a little over 23% since the muhurat session on Diwali day, while the mid-cap index is now down 21%. Compared to the sensex and nifty stocks, which are the preferred picks for fund managers, retail shareholding in midcap and small-cap counters are much higher. And this is one of the reasons why the slide in the small-cap and midcap indices are so much more than that in sensex and nifty, a dealer with a local brokerage explained.