IRCTC, IRFC, BEML, RVNL: Why Railway Stocks Are Falling After Budget, Is There Buy-On-Dips Opportunity?

Railway stocks, the rising stars of 2023, have taken a backseat after interim budget announcements. Right from the largest railway stock IRFC to Indian Railways' darling categering services provider, IRCTC. Railway stocks have been down since February 2nd. On Monday, these shares tumbled by 2% to 6% after market hours.

On BSE, IRFC shares dipped by 2.2% to Rs 946.50 apiece, while IRFC share price took a massive hit by falling 5% to Rs 160.50 apiece.

Other railway stocks like BEML slipped 2.8%, IRCON International shed 3.8%, RVNL plunged 4.5%, RailTel Corp dived 2.3%, Titagarh Rail Systems plummeted by 1.8%, and Texmaco Rail saw the most drop in percentage terms to the tune of 5.9%.

What Experts Say About Railway Stocks:

On the latest downfall in railway stocks, Manish Chowdhury, Head of Research, StoxBox said, Though Indian Railways stocks were among the biggest gainers on Dalal Street in the past year, the stocks appear to losing charm after the budget. The rail budget's allocation for FY24-25 is 5% higher than a year ago budget but below the street expectation of around 10-20% from the last budget."

Chowdhury added, "With the increase in government spending on railway infrastructure in FY24 directly contributing to a robust order book for companies that are engaged in manufacturing railway equipment, the execution will be an important thing to watch out for. We believe that the recent fall was due to profit booking as the stocks have already factored in the fundamentals."

Hence, railway stocks are falling because they are correcting after back-to-back record highs. Notably, the interim budget announcements are going to be positive for railway companies.

In its research note, Axis Securities said, "The government's capital expenditure will grow to Rs 11.1 Lc Cr, reflecting an encouraging growth of 11.1% in FY25 over the FY24 figure. Its unwavering focus on Roads, Power, Urban Development, and Railways will create key long-term economic multipliers. In a significant development for the railways, the government has announced higher capital outlays of 2.55 Lc Cr for the segment, which will notably boost railway infrastructure moving forward. Moreover, the conversion of the existing 40,000 bogies to Vande Bharat standards under the Pradhan Mantri Gatishakti scheme will greatly enhance the efficiency and modernization of the railway infrastructure in the country."

Railways Interim Budget:

Interim Budget On Railways: FM Nirmala Sitharaman has made transformational announcements for the railways sector in the Interim Budget. She said, three major economic railway corridor programmes will be implemented. These are (1) energy, mineral and cement corridors, (2) port connectivity corridors, and (3) high-traffic density corridors. She added that the projects have been identified under the PM Gati Shakti for enabling multi-modal connectivity. They will improve logistics efficiency and reduce costs.

Further, she said, the resultant decongestion of the high-traffic corridors will also help in improving the operations of passenger trains, resulting in safety and higher travel speed for passengers. Together with dedicated freight corridors, these three economic corridor programmes will accelerate our GDP growth and reduce logistic costs. Moreover, she added, 40,000 normal rail bogies will be converted to the Vande Bharat standards to enhance the safety, convenience and comfort of passengers.

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