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Business News/ Markets / Stock Markets/  Mcap of these 5 railway PSUs jumped by over 1.2 lakh crore this week; IRFC leads the way

Mcap of these 5 railway PSUs jumped by over ₹1.2 lakh crore this week; IRFC leads the way

During the week, the market capitalisation of five key railway PSUs, namely Rail Vikas Nigam, Indian Railway Finance Corporation (IRFC), Ircon International, RailTel Corporation of India, and IRCTC, witnessed an extraordinary surge, collectively gaining ₹1.22 lakh crore.

The surge in railway stocks was fueled by significant order wins resulting from the ongoing transformation within the railway sector. (Mint)Premium
The surge in railway stocks was fueled by significant order wins resulting from the ongoing transformation within the railway sector. (Mint)

In the financial landscape, railway PSU stocks have emerged as steadfast leaders, navigating the market's twists and turns with resilience. This week, their ascent has been nothing short of remarkable, transcending the prevailing market uncertainties and achieving record highs.

The frontline indices grappled to gain momentum this week amid global uncertainties and lacklustre earnings by major companies so far. Despite this, railway PSUs have emerged as robust performers, delivering double-digit returns, with some boasting gains exceeding 55%.

Also Read: NHPC spikes 15%, BSE PSU index records new all-time high surging over 3.5%

Among these, Rail Vikas Nigam witnessed an outstanding rally of almost 58% throughout this week. Today, the stock hit its 10% upper circuit limit, reaching a new all-time high of 320.35 apiece, lifting the company's market capitalisation to 66,793 crore. Notably, the company gained 24,356 crore in market value just this week.

Along similar lines, shares of Indian Railway Infrastructure Corporation also exhibited unwavering strength throughout the week. The stock witnessed a remarkable ascent from 113.40 apiece, hitting a 10% upper circuit limit today and achieving a new peak of 176.25. During this period, the stock soared by 55.42%.

Also Read: Railway stocks jump up to 15% in intra-day deals to their respective new highs

As stock hit a new all-time high, the company's market capitalisation surged to 2,30,332 crore today, surpassing that of 22 Nifty 50 companies. In just this week, the company's market cap witnessed a stellar rise of 82,082 crore.

Another railway PSU that made strides this week was Ircon International, with its shares reaching a new all-time high of 271 apiece in today's trade. Starting the week at 195 apiece, the stock surged to 267 apiece, delivering a return of 37%. This surge propelled the company's market capitalisation by 6,852.6 crore, reaching a total of 25,182 crore.

Similarly, RailTel Corporation of India witnessed a 25% surge in its shares this week, while IRCTC recorded an increase of nearly 8%. The market capitalisation of RailTel Corporation increased by 2,783 crore, and that of IRCTC rose by 5,920 crore. Collectively, the market capitalisation of these five railway PSUs soared by 1.22 lakh crore during this week.

Why are railway stocks surging?

The surge in railway stocks was fueled by significant order wins resulting from the ongoing transformation within the railway sector. Additionally, the market is anticipating a fresh investment announcement by the Government of India (GoI) for railway infrastructure development in the upcoming 2024 budget, along with high expectations for strong Q3 results.

Also Read: Railways may get more elbow room to spend in year ahead

Mr Anirudh Garg, Partner and Fund Manager at Invasset, PMS, said, "We adhere to the Two Run Theory, a strategy that categorises economic runs into two distinct parts: the Old Economy Run and the New Economy Run. Currently, India finds itself in the midst of an Old Economy run, which places a strong emphasis on capital expenditure (capex) and sectors sensitive to interest rates.

"Our proactive identification of this old economy run has shaped our investment focus, leading us to emphasise railway, defence, and PSU (public sector undertaking) stocks. It's essential to note that this approach is not geared towards short-term gains but rather focuses on capitalising on the entire sectoral run," he added. 

Anirudh Garg highlights the following key reasons behind the surge in railway stocks:

Fundamental Shift: The railway sector is undergoing a fundamental transformation, presenting significant growth opportunities. This shift extends beyond short-term market dynamics.

Earnings Growth: Evaluating these stocks based solely on price-to-earnings (PE) expansion overlooks the substantial earnings growth expected in the next 2 to 3 years.

Expanding Order Book: It's important not to judge the sector solely based on the current order book, as it is poised to expand significantly in the coming years.

Government Initiatives: Railway Minister Ashwini Vaishnaw's announcement of a substantial capex of 2.4 lakh crore in the Union Budget 2023-2024, a substantial increase from the previous 55,000 crore, demonstrates the government's commitment to the sector's development. 

Additionally, the launch of 3,000 new Vande Bharat trains over the next 5 years and a planned investment of 7 trillion over the next decade further bolster the sector's growth prospects.

Disclaimer: The views and recommendations given in this article are those of individual analysts. These do not represent the views of Mint. We advise investors to check with certified experts before taking any investment decisions.

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Published: 20 Jan 2024, 05:29 PM IST
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