Railway stocks mixed as some profit booking kicks in, but optimism remains high

Prominent railway stocks corrected 10-34 percent in the July-September period.

Shares of railway-related stocks traded mixed on December 17, with names like Railtel Corp, Texmaco Rail, Rail Vikas Nigam gaining 1-2 percent while others like Titagarh Rail, Jupiter Wagons and IRFC witnessed slight profit booking that dragged the stocks into the red.

This comes after railway stocks bounceback back into the limelight in the past months strong optimism over the sector's growth prospects. Shares of  Railtel Corp, Texmaco Rail, Rail Vikas Nigam, Titagarh Rail, Jupiter Wagons and IRFC surged 15-26 percent in the past month, staging a sharp turnaround from their 10-34 percent correction in the July-September period.

A slew of factors, including hopes of increased government spending after the completion of the general and state elections, clearing of stalled railway tenders, anticipation of the upcoming Union Budget, and more reasonable valuations have rekindled investor interest in the sector.

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These expectations also gathered pace after the government actually began clearing bottlenecked projects as general and state elections now stand behind us. In late November, the union cabinet approved three mega railways projects with a capital outlay of Rs 7,927 crore in end November. Alongside that, Texamco Rail also secured an order valued at Rs 187.41 crore from the  Chhattisgarh State Power Transmission yesterday, for the construction of nine transmission lines. These projects align with the PM-Gati Shakti National Master Plan for multimodal connectivity, further fueling optimism for continued investment in the sector.

Analysts point out the weak government spending in the first half of the current fiscal, which has further ushered hoped of projects picking up in the second half of FY25, with stalled railway contracts coming out.

Also Read | Investors are falling in love with railway stocks all over again. Will they be betrayed?

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