Railway Stocks on the Rise: What's Behind the Rally?

Date : 09/06/2023
Read: 3 mins

Railway stocks are on the rise! Find out why investors are flocking to these stocks and what the future holds for the railway industry.

Railway stocks rally in 2023
Record budgetary allocation a major factor
Strong order book and growth prospects
Some stocks with dividend yield over 4%

The Indian Railways are not just a transportation system but a lifeline for millions of people in the country. The railway sector has been expanding through electrification, new lines, and signalling projects, and this growth is reflected in the rise of railway shares. Companies associated with the railway sector, such as IRCTC, Texmaco, and Ircon, have witnessed a windfall in terms of share price growth, with gains of almost 83% in 2023 so far. The question on everyone's mind is, what is driving this unprecedented rally? Is it government support or rising demand? In this article, we will try to decode the reasons behind the recent surge in railway stocks.

Stock prices of prominent companies (past one year)

Given above are candlestick charts of three stocks from the railway sector. The shares have either moved above after consolidation or appear set to move above after consolidation.

Also Read: 5 Best Indian PSU stocks to invest in 2022

Performance of prominent railway stocks in past one year is presented in the table given below:

(Source: stockedge.com). Figures as on 9^th June, 2023)

Reasons for rally in Indian Railways Stocks

The record-breaking budgetary allocation of Rs 2.4 lakh crores for the development, maintenance, and expansion of the railway network in the Union Budget has played a significant role in the rally of railway stocks in 2023. This unprecedented investment has had a positive ripple effect, propelling the stocks to new heights. With the government's focus on increasing capital expenditure and the implementation of policies like PM Gati Shakti and National Logistics, the railway sector is poised for further growth and continued support, offering promising prospects for railway stocks.
Government's push for manufacturing railway coaches, including the production of 120 Vande Bharat trains, has driven the growth of railway stocks. State governments like Gujarat and Telangana are also placing orders, such as RVNL securing two orders from Gujarat Metro Rail Corporation, increasing demand and boosting prospects for railway stocks.
These railway stocks offer stability and regular income through high dividend yields, complemented by a strong order book and promising growth prospects. With some stocks having dividend yields surpassing 4% (as shown in the above table).

Also Read: IRCTC Q3 results declared. Profit rises 22% YoY. Here are insights

The Indian railway sector is poised for growth, with the government's increased budgetary allocation and focus on manufacturing railway coaches. However, there are some challenges, such as the need to improve efficiency and reduce costs. Overall, the sector is attractive for investors, with high dividend yields and promising growth prospects.