Railway stocks on racetrack as investors place tactical bets

With investors lapping up shares of railway companies, some sector-specific stocks have been in the limelight lately. At 11:23am today, shares of Indian Railway Finance Corporation Ltd (IRFC), Rail Vikas Nigam Ltd (RVNL), Titagarh Wagons and Texmaco Rail and Engineering traded 5-10 percent higher on the BSE.

Shares of RVNL were locked in the upper circuit at Rs 80.30, while Titagarh Wagons stock was also locked in the upper circuit at Rs 186.35 on the BSE at 12 noon.

RVNL has given 96 percent returns in the past one month and IRFC has generated 51 percent.

In the past three months, shares of IRFC, RVNL, RITES, Titagarh Wagons, Texmaco Rail and Engineering, Railtel Corporation of India have rallied around 18-147 percent.

“Railway stocks are generally a tactical play. This means investors are buying these stocks as a short-term investment bet based on the anticipation of some announcement from the government,” said Awanish Chandra, Head of Equities, SMIFS.

The announcement is likely regarding railway-related capital expenditure, he added.

Besides, several railway-related stocks generally have a low valuation which offers scope for an upside in the share price, Chandra pointed out.

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There was a news report that the government might divest up to 10 percent stake in RailTel, RVNL and four other public-listed railway firms, which also boosted investor sentiment for the sector, especially the public-listed railway companies.

Another reason for the enthusiasm for the railway stocks, as Chandra pointed out, is the expectation of some announcement related to the sector in the budget.

Around 300-400 Vande Bharat trains are expected to be announced in the Budget 2023-24 as part of the Indian Railways’ plan to modernise its rolling stock, as per a report. This is in addition to the fleet of 400 such trains announced this year. The expectation is that about 100 trains will be manufactured in 2023-24, the report stated.

Investment in railway projects from the central budget is said to have risen 91 percent YoY to Rs 88,548 crore in the first half of the current financial year.

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