RVNL, IRFC, IRCTC, Ircon, Titagarh, Jupiter Wagons, BEML, Texmaco: Will railway stocks shine in 2025?

Despite falling up to 41 per cent from their 52-week high levels, a dozen railway stocks are ending Calendar 2024 on a strong note. In 2025, all eyes would be on increased government spending, clearing of stalled railway tenders and expectations of higher budgetary allocation for the sector in the upcoming Union Budget. Be selective as many railway-linked stocks are still not reasonably valued, analysts warned in a BTMarkets year-end survey.

Rail Vikas Nigam Ltd (RVNL) shares surged 134 per cent year-to-date while those of Kernex Microsystems (India) Ltd advanced 131 per cent during the same period. Stocks such as Jupiter Wagons Ltd (up 58 per cent), Indian Railway Finance Corporation Ltd (47 per cent), BEML Ltd (44 per cent), Oriental Rail Infrastructure Ltd (38 per cent), Ircon International Ltd (22 per cent) and Railtel Corporation Of India Ltd (18 per cent) advanced up to 58 per cent for the year.

Texmaco Rail & Engineering Ltd and Titagarh Railsystems Ltd added 17 per cent and 10 per cent, respectively. Indian Railway Catering And Tourism Corporation Ltd (IRCTC) remained an exception, falling 12 per cent for the year.

Surjitt Singh Arora, Portfolio Manager - PMS at PGIM India AMC said ordering in railways has picked up during the December quarter. A steady state demand of 1,500 locomotives is expected from the railways over the next few years, Singh said.

Ajit Mishra - SVP, Research, Religare Broking said railway stocks exhibited strong growth potential, driven by the government's focus on infrastructure development and the rising demand for efficient transportation solutions.

"Among them, BEML Ltd, a leading manufacturer of railway coaches and wagons is well-positioned to benefit from government initiatives and increased infrastructure investments, which enhance the sector's growth outlook. Other notable railway stocks to consider include Container Corporation of India Ltd, Jupiter Wagons Ltd, and Titagarh Rail Systems, all of which are poised to capitalise on the expanding opportunities in India's railway and transportation sector," Mishra said.

Mishra, however, believes investors should conduct thorough research and carefully evaluate various factors before making investment decisions in railway stocks.

Jathin Kaithavalappil Assistant Vice President at Choice Broking said the performance of the railway sector depends on consistent expenditure by the government. Selective opportunities like IRCTC and RVNL warrant monitoring due to their strategic importance and potential policy backings, even though growth will be modest in the near term, he said.

Narendra Solanki, Head Fundamental Research - Investment Services, Anand Rathi Shares and Stock Brokers said after going through a phase of steep correction in the July-October period, railway stocks are back in light, rebounding sharply over the past few weeks.

"With general and state elections now behind, focus has been increased on government spending, clearing of stalled railway tenders, anticipation of the upcoming Union Budget. However, we believe that the stocks in the industry are still not cheap and ahead of fundamentals and investors may buy the stocks in a staggered manner," he said.