Railway stocks fell on February 1 after the Finance Minister Nirmala Sitharaman announced an increase in allocation for the sector. The stocks were trading higher in January amid expectations of increase in capital allocation for railway and infra sectors.
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Rail Vikas Nigam (RVNL) fell 1.24 percent, Indian Railway Finance Corporation (IRFC), IRCON International fell 1.5 percent, RailTel Corporation of India fell 2.6 percent and Texmaco Rail & Engineering fell 1.2 percent. IRFC stocks were trading flat.
Financial Minister Nirmala Sitharaman announces a capex allocation of Rs 2.55 lakh crore for the Indian Railways in the new financial year, surpassing the previous all-time high of Rs 2.4 lakh crore allocated in the last budget.
This railway capex was just 5 percent higher from a year ago budget and lower than the analysts estimates of 10 percent higher allocations from last budget.
FM also unveiled three new railway corridors (Energy, Mineral and Cement; Port Connectivity; High Traffic Density) under the PM Gati Shakti scheme for enhanced multi-modal connectivity, aiming to lower costs and enhance efficiency. In addition, 40,000 bogies will be converted to Vande Bharat standard, prioritizing safety and convenience for passengers.
Stock rally
Railway stocks rallied significantly over the past one year. Stock such as Ircon International, Indian Railway Finance Corporation (IRFC) and Rail Vikas Nigam surged by 300 percent, 400 percent and a whopping 936 percent respectively over this period.
That said, IRFC has a low float with the government holding over 86 percent stake in the company. Therefore, any move on either side of the stock can result in an extreme share price reaction, warranting caution.
Largely the rally in railway stocks was driven by the government's capex push and Make in Indian campaign, both of which are positives for this sector.
Recently in an interview with CNBC-TV18 at the World Economic Forum 2024 in Davos, Railway Minister Ashwini Vaishnaw said progress in expansion and modernisation of the railways is huge.
"Last year we added 5,200 km of new tracks. That’s like adding the entire Swiss network in one year. We are now aiming at a pace of 15 km of tracks a day," he said, adding that out of the Rs 2.4-lakh-crore capex plan, 77 percent has been completed as of date.
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