Those who have missed these multibagger trains are now contemplating whether they can catch them before July 23 at the next station – final Budget for FY25.
In the interim Budget, Finance Minister Nirmala Sitharaman had raised allocation towards railways, which has been a cornerstone of Modi government’s infra development strategy, increased 5% year-on-year (YoY) to Rs 2.6 lakh crore.
Many analysts are now expecting allocation in the final Budget to increase further with a focus on modernisation, safety as well as expediting of the dedicated freight corridors. Since FY18, rail allocation has expanded by 2.6 times.
“We expect increased spending on upgrading rail infrastructure & capacity (rolling stock, electrification, freight corridors, high-speed rail, metros, etc.), introducing new trains (Vande Bharat, Vande Metro, Namo Bharat, etc.), and improving safety (Kavach anti-train collision system),” said Amnish Agarwal of Prabhudas Lilladher.
Huge capex plans of Railways will benefit companies like Ircon, RVNL, Siemens, Timken India, HBL Power, ABB, BEML, BHEL, Jupiter and Titagarh Wagons, he said.
Analysts believe that rail stocks have significant growth potential due to their large order books, which are likely to expand further post the final Budget.
“The focus on faster execution is expected to boost revenues and profit growth. If growth rates are achieved, current valuations are justified; otherwise, they may appear stretched,” Dr Vikas Gupta, CEO and Chief Investment Strategist, OmniScience Capital, said.
Nuvama analysts expect robust capex outlay momentum to continue with 15-20% YoY growth as the focus shifts to rolling stock, safety, new tracks laying, etc over the coming years.
“Even if Railways capex allocation remains stagnant, we still see higher allocation towards private sector vs self capex ordering done earlier,” the brokerage said.
A higher than expected dividend from RBI and strong tax collections gives the government the room to increase allocations to roads and railways.
“The increased fiscal room compared with the interim Budget may allow the government to increase FY2025BE capex by Rs 80,000 crore. As a result, we may see increased capex and the government setting medium-term targets in key sectors such as defence, housing, railways, roads, urban infrastructure and water.
However, rail stocks can be a risky bet in the short term given elevated valuations and the fact that most of the positives are already priced in.
“Once you start valuing cyclicals like consumer in a bull market, you tend to make a mistake of buying them at very high prices and factoring in all good things. But it does not mean that all railway stocks are expensive and you should completely stay away from them. I think it is a great 5-10-year story,” says Gurmeet Chadha of Complete Circle Consultants.
Investors who want to get down at the next station should think twice before buying rail stocks.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)
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Source: Rail stocks zoom up to 101% since interim Budget. Is there still time to board the
