IRFC, RVNL to IRCTC: Is it wise to buy railway stocks after GoI’s nod to eight new projects

Stocks to buy: Railway stocks will be in focus on Monday as the Cabinet Committee on Economic Affairs approved eight new railway projects on Friday. These railway projects worth ₹24,657 crore will cover 14 districts of seven Indian states, said Minister for Railways Ashwini Vaishnav while informing us about the outcome of the meeting. According to stock market experts, the new railway projects will be a big boost for the railway PSUs as these companies are expected to get fresh business due to the announcement of these railway infrastructure projects. They also said that PSU stocks have received heavy beating after the weak Q1 results 2024 season due to the policy paralysis due to the Lok Sabha Elections.

The government's proactive approach is expected to boost the operations of these railway PSUs. Hence, in the medium to long term, one can expect improvement in the quarterly numbers of the state-owned railway companies in upcoming quarters.

Triggers for railway stocks

Advising investors to keep an eye on railway PSU stocks, Avinash Gorakshkar, Head of Research at Profitmart Securities, said, "This is the second big rail infra project announced by the Government of India (GoI) in 2024. In 2024, the GoI had declared six new railway projects worth over ₹12,300 crore. Hence, railway stocks will be definitely in focus when the Indian stock market reopens on Monday." However, he maintained that other segments, like logistics and consumer durables like batteries, cables, etc., would also react to this development.

Railway stocks in focus

On railway stocks focusing on Monday, Seema Srivastava, Senior Equity Research Analyst at SMC Global Securities, said, “Due to policy paralysis, PSU stocks, including railway PSUs, received a beating after the below estimated Q1 results 2024. Now, state-owned companies are expected to operate in full swing, and this new railway project announcement is a glaring example of this. After these eight new railway projects are announced, IRFC is expected to emerge as a major beneficiary company as it provides credit lines to project-winning railway companies. Apart from IRFC, Rail Vikas Nigam Limited (RVNL), IRCTC, and Railtel would benefit from these fresh railway projects.”

On why IRFC share price may witness strong buying interest on Monday, Avinash Gorakshkar said, “IRFC would be the biggest beneficiary company of these fresh railway projects as it caters to around 40-45 percent of Indian railways's Capex funding.”

Asked about the logistics company that may benefit from these fresh projects, Seema Srivastava, who is also a professional Chartered Accountant (CA), added, "I think Container Corporation of India (CONCOR) would be another big company that will benefit from this new railway project announcement."

Batting in favour of IRCTC, Avinash Gorakshkar of Profitmart Securities said, “IRCTC may also benefit from these fresh projects as the fresh projects are expected to add around 800 km of fresh tracks to the Indian railway network. IRCTC is in the railway ticketing, hospitality, catering, and private train operation business. But the benefit would trickle in the long term.”

Disclaimer: The views and recommendations above are those of individual analysts or broking companies, not Mint. We advise investors to check with certified experts before making any investment decisions.