Railway stocks have seen a significant upswing over the past week, indicating a renewed sense of optimism in the sector. Some railway stocks have zoomed over 100% so far in 2023, delivering multibagger returns. Despite the recent run-up, some market participants are worried that railway stocks have entered the overbought zone while others see fundamental triggers for further upside
Shares of Rail Vikas Nigam Ltd (RVNL), Indian Railway Finance Corp (IRFC), Ircon International, Titagarh Rail Systems, Jupiter Wagons, Texmaco Rail and Engineering, IRCTC, Railtel Corporation of India and RITES have surged 5-25% in the past one week. According to experts, money is shifting within the railway sector as investors continue to find value in the space
The value of railway company shares jumped, continuing their rally on September 6 (Wednesday), primarily taking support from massive government investments into the sector. The Ministry of Railways will ask the Cabinet for approval to invest Rs 5.25 lakh crore in the PM Gati Shakti National Master Plan from 2024 to 2031. Another driver has been that from April 1 to August 31 this year, Railways has seen the highest-ever capital expenditure utilisation of around 48%. During these first five months of FY24 until August 2023, the railways spent Rs 1,15,000 crore
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The government has announced plans to invest heavily in the railways in the coming years. This includes plans to build new lines, upgrade existing infrastructure, and electrify the railway network. Centre is actively developing a Production-Linked Incentive (PLI) programme to stimulate domestic production of wheels, brakes, and transmission systems specifically designed for Linke Hofmann Busch (LHB) and Vande Bharat train sets
The expected quantum of the PLI scheme for the railway sector is likely to be in the range of Rs 800-1,200 crore and would be spread over three years. The government's goal is to reduce dependency on imports from China and Europe. This scheme is also expected to attract foreign investment in the railway sector. The demand for rail travel is growing due to a number of factors, including rising disposable incomes, increasing urbanization, and the government's focus on promoting public transportation
Shares of IRFC have jumped more than 109.73% so far this year, doubling investors' money. In the last one year, the stock has zoomed 200%, and is currently trading at around Rs 69 on NSE. In terms of technicals, the relative strength index (RSI) of the stock stands at 91.2, signalling the stock is strongly overbought, and it has a one-year beta of 1.06, indicating high volatility
Shares of RVNL have jumped more than 119% so far this year, doubling investors' money. In the last one year, the stock has zoomed 356%, and is currently trading at around Rs 150.25 on NSE. In terms of technicals, the relative strength index (RSI) of the stock stands at 84.5, signalling the stock is strongly overbought, and it has a one-year beta of 1.01, indicating average volatility
Shares of Ircon International have jumped more than 103% so far this year, doubling investors' money. In the last one year, the stock has zoomed 185%, and is currently trading at around Rs 121.35 on NSE. In terms of technicals, the relative strength index (RSI) of the stock stands at 77, signalling the stock is strongly overbought, and it has a one-year beta of 1.49, indicating very high volatility
Share price of other railway stocks including RailTel Corporation, Titagarh Rail Systems, Texmaco Rail & Engineering, RITES has zoomed up to 150% so far this year. Despite the rally in stock prices, investors should be cautious about railway companies, according to share market experts
Even as technical chartists suggest that many of these railway stocks are in the overbought zone, fundamental analysts are of the view that most were not moving since quite some time which is why the value was suppressed for a long time. Moreover, there is a buzz in the market about mergers in the sector which could lead to synergies such as cost reduction and efficiency for railway players
According to Helios Capital's Samir Arora, investors should remain cautious about rail sector stocks as railway companies in India have a history of not being paid on time by governments, thereby impacting their growth. Additionally, sometimes, the government changes or they also cancel orders given to railway companies by the previous government, which can hamper the rally quickly
Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Business Today. Investors should consult their financial advisors before taking any position