Rail-related stocks surge on rise in budgetary allocation for Railways

Shares of railways-related stock witnessed an uptrend on Wednesday, in sync with the broader market, after Finance Minister Nirmala Sitharaman in her Budget speech proposed ₹2.40 lakh crore budgetary allocations for Indian Railways, which is 9 times higher than 2013 -2014. This will benefit all EPC (Engineering, Procurement and Construction) based companies, product companies in wagons, signalling, communication, bearings etc.

Presenting the Budget 2023 in the Parliament, Sitharaman announced that the railway sector will get an outlay of ₹2.4 lakh crore in order to expand the sector’s infrastructure in the coming years. This is the highest-ever outlay received by railways in the Union Budget.

In last year’s union budget, Sitharaman had announced an outlay of ₹1.4 lakh crore for the railway sector. In FY22, Railway expenses increased by 45% as compared to the previous year whereas gross revenue increased by 43%. The central government is expecting revenue from Railways to increase by ₹32,700 crore in FY23 over revised estimates of FY22. 

Boosted by record rise in capex for Railways, shares of Indian Railway Catering & Tourism Corporation (IRCTC), Siemens, Rail Vikas Nigam (RVNL), KEC International, Titagarh Wagons rose up to 4% on the BSE. Among others, Container Corporation of India, Indian Railway Finance Corporation, RITES, and BEML were also trading higher.

Meanwhile, the BSE Sensex was trading nearly 500 points higher at 60,050 levels, holding early gains, led by capital goods and metal stocks. Similarly, the 50-share NSE Nifty was at 17,800, up by 138 points, or 0.78%. Among individual stocks, ICICI Bank, Tata Steel, Larsen & Toubro, HDFC Bank, and Housing Development Finance Corporation Ltd. (HDFC).

Commenting on the rail budget, a CRISIL spokesperson said, “Investment of ₹75,000 crore focusing on freight will help Indian Railways increase its modal share. This is in line with the National Rail Plan aims to raise the modal share to 50% from 25% now.”

The economic survey 2022-23, which was released on Tuesday, also said that the development of road and railways witnessed an “unprecedented expansion” in the last eight years. As per the survey, the capital expenditure on railway witnessed a growth of 29% at ₹2.5 lakh crore as against the previous year.

“This has helped the country move from unimodal to multimodal transportation, providing a window of opportunity to the private sector to invest and reinvest in these assets, which has already been facilitated by the policy of asset monetization. Extending infrastructural facilities is only part of the story; modernisation is the other important principle that has been attempted with verve and achieved with commendable speed,” the survey said.