Railway stocks dip post-Budget announcement as railway expenditure less than market estimate; should you invest now? – Market News

Railway stocks dip post-Budget announcement as railway expenditure less than market estimate; should you invest now? – Market News


Railway-linked stocks, including IRFC, Rail Vikas Nigam (RVNL), Railtel, and others, witnessed a dip in their stock prices following Finance Minister Nirmala Sitharaman’s conclusion of her interim Budget speech in the Lok Sabha on Thursday.

Shares of IRFC, RVNL, Railtel, and other related stocks are grappling with losses ranging between 3% and 5% post budget speech.

Despite the market’s anticipation, the Budget allocated a capital expenditure (capex) of ₹2.55 lakh crore for the Indian Railways. While this figure is marginally higher than the ₹2.4 lakh crore announced in the previous year’s Budget, brokerages had anticipated a more substantial increase in rail sector capex. Notably, Nirmal Bang was expecting a 20% surge in Railway Capex during this interim Budget.

The proposed capex boost aims to drive further expansion of the Dedicated Freight Corridor, rolling stock, and High-Speed Rail (HSR) Networks. Analysts were particularly hopeful for an elevated allocation in these areas.

In her announcement, Finance Minister Nirmala Sitharaman unveiled three new corridors for the railways – the Energy, Mineral, and Cement corridor, Port Connectivity Corridor, and a High Traffic Density Corridor.

The stellar performance of railway stocks in 2023, with shares witnessing significant gains ranging from 100% to 300%, had set high expectations in the market. Stocks such as IRFC and RVNL had already recorded impressive gains, with some surging as much as 70% in January alone.

“However, railway stocks experienced a decline, possibly due to concerns over the implementation and impact of announced projects,” said Sonam Srivastava, Founder and Fund Manager at Wright Research.

Srivastava also added that, the overall market’s muted reaction suggests cautious optimism, with investors closely monitoring the implementation of budget measures and their tangible impacts on various sectors.

Commenting on the same Atul Parakh, CEO of Bigul said that, the disappointment regarding lower-than-expected budget allocation for railway infrastructure may lead to continued short-term volatility in railway stocks. There could be some profit booking and corrections in stock prices in the near term as investors look for other opportunities.

“However, the industry’s long-term fundamentals continue to remain strong due to massive infrastructure needs, the government’s commitment to modernization, and continued focus on passenger and freight growth, including dedicated freight corridors and future privatization initiatives. We cannot be certain about future budgetary allocations in various sectors, but it can be said that infrastructure development will remain a priority,” added Parakh.


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