Pre-Budget rally boosts Railway stocks amid hopes of higher allocation; RVNL, IRCON, RailTel rally 18-55% over 1 month

Over the past month, these stocks are up anywhere between 18% to 55%. Since the interim budget announcement on February 1, these stocks have experienced gains ranging from 28% to 112%. Rail Vikas Nigam leads with a 112% increase, followed by IRCON at 44% and RailTel at 37%. Texmaco Rail has risen by 31% and IRFC by 28%.

In the Interim Budget for FY25, Finance Minister Nirmala Sitharaman allocated Rs 2,52,200 crore to the railways as gross budgetary support, with an additional Rs 10,000 crore from extra-budgetary resources.

The government also announced plans for dedicated tracks for coal and mineral transport, improved port connectivity, and measures to address congestion, aiming to enhance efficiency and capacity.

Experts anticipate a 12-15 % increase in the budgetary allocation in the upcoming Union Budget. Expectations include reforms such as the introduction of a hybrid annuity model to boost public-private participation in the railways sector and efforts towards asset monetisation.

The railway industry has called on the central government to maintain capital expenditure in the forthcoming budget, while former officials and experts emphasise the need to focus on safety.

Experts also recommend prioritising energy, mineral, and cement corridors and increasing investment in technological advancements such as rail-road connectivity, IoT, automation, blockchain, cloud computing, AI, and robotics to enhance logistics development.

They further suggest that increased track construction pace, emphasis on high-speed trains, significant investments in rolling stock, and substantial completion of dedicated freight corridors are beneficial for the sector. However, challenges such as the lack of a regulatory body and limited public-private participation remain. A recent study indicated that India has 800 crore rail trips annually, which is projected to rise to 1000 crore by 2030.

The conversion of rail bogies to Vande Bharat standards is expected to augment Vande Bharat Train Capacity by 50-60 times in the medium term. The focus on economic rail corridors to achieve first-mile-last-mile connectivity and station redevelopment is expected to continue.