Rail stocks under pressure, Titagarh, RailTel, Jupiter Wagons fall up to 8%. Here's why

Titagarh Rail Systems, too, fell over 6 percent to hit an intraday low of Rs 823.25 on NSE despite winning a Rs 1,909.04 crore order. The stock gained 75 percent in the past year.

A Rs 957-crore order from the railway ministry did little to help mobility solutions provider Jupiter Wagons share, which plunged more than 8 percent.

RailTel, Ircon International, Indian Railway Finance Corporation IRFC, Texmaco Rail Engineering and IRCTC were also down up to 5 percent.

What's dragging railway stocks?

According to Vinit Bolinjkar of Ventura Securities, railway stocks are seeing a correction due to year-end phenomena of profit-taking and tax-booking.

As the financial year 2024 draws to a close, profit-taking is likely since investors usually sell their positions to lock in gains after a period of price appreciation.

"Additionally, investors may engage in tax-booking, which involves selling losing positions to offset capital gains elsewhere in their portfolios for tax purposes," he told Moneycontrol.

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Another potential factor could be the liquidity squeeze resulting from actions by the RBI, SEBI, and ED, Bolinjkar said.

The crack downs has particularly hit small and midcap stocks, prompting investors to trim some of their holdings to overcome the liquidity crunch.

This is a short-term downfall, mainly due to profit-booking, Khushi Mistry, research analyst at Bigul, the digital arm of Bonanza Portfolio, said.

Mistry said valuations are not a concern at the moment, given that the long-term positive outlook is intact.

Technical factors

Titagarh counter witnessed a breakdown of a head-and-shoulders formation pattern with huge volumes. The short-term structure of the counter got distorted, as it trades below all its important moving averages.

The momentum indicator relative strength index (RSI) is also negatively poised, whereas moving average convergence divergence (MACD) is supporting the downside on the counter, said Pravesh Gour, Senior Technical Analyst at Swastika Investmart Ltd.

"On the downside, 200-SMA at around Rs 780 will act as a strong support; if it breaks this level, then Rs 600 will be the next support. On the upside, Rs 1000 is the immediate resistance," he said.

Jupiter Wagons witnessed a breakdown of the descending triangle formation with strong volume. The overall structure is distorted as it trades below the 9, 50, and 100-day SMA moving averages and the momentum indicators are also negatively placed.

"On the downside, 200-SMA at around Rs 290 is the strong support level where we can expect a bounceback, while on the upside, the level of Rs 340 is likely to act as an immediate hurdle," said Gour.

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When will rally resume in railway stocks?

The correction in railway stocks is expected to last till March-end, Bolinjkar said. From April, the rally may resume.

Mistry agreed, saying that after the short-term correction, upward movement will resume, as the railway sector is likely to witness several positive triggers in the near future on account of upcoming projects, increased government spending, and healthy order books of these companies.

Investors can use the correction to either accumulate railway stocks or even make fresh entries, she added.

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