MUMBAI: The shares of companies catering to Indian Railways’ network will be in sharp focus in the coming weeks with brokers advising their clients to buy into railway stocks based on past record that shows that these shares tend to rally ahead of the Rail Budget that’s presented in February.
In the past, shares of Kalindee Rail Nirman Engineers, Simplex Castings, Kernex Microsystems, Titagarh Wagons, Texmaco, Stone India, Hind Rectifiers and PSUs such as Container Corporation of India, BEML and Bhel had a good run weeks preceding the Railway Budget.
Experts reckon that over the past few years, there have been no negative surprises in the Railway Budget and expectations are running high this year as well. These stocks are safe bets, as only these companies get all the railway-related orders for whatever initiatives are announced in the Budget. In the past few years, it has been noticed that some of the railway stocks have given returns anywhere between 20 per cent and 50 per cent in just over a couple of months.
Brokerage houses are pretty optimistic about the prospects this year. “Railway stocks: Don’t miss the train! Join the bandwagon,” said IIFL, a Mumbai-based brokerage house, in a note to clients. “Railway stocks have been the darling for traders, especially in anticipation of the Railway Budget. This sector, which is forgotten most of the year, gets higher fund allocation towards the end of the financial year.” IIFL’s note said that historical data suggests that there’s action in railway stocks almost a quarter ahead of the Railway Budget. “A look-back at the performance of railway stocks in the past five years throws a pleasant surprise as most of the railway stocks have chugged ahead and delivered handsome returns in a very short time,” IIFL said.
“Interest in railway stocks will be higher this year as markets perceive Suresh Prabhu (railway minister) to be a man of action,” said Devang Kamdar, vice-president, Sharekhan. “Hope is high from Railway Budget as Prabhu’s 2014 presentation was impressive and liked by experts across the board. In fact, we are also trying to find out new companies that may benefit from railway’s initiative to improve the food supply.”
Market experts also say that railway company stocks will be in focus due to the opening up of FDI in many rail-related sectors. “This year, there’s further incentive to buy into railway related stocks as the government has raised the FDI cap in certain railway-related sectors to 100 per cent,” said Alex Mathew, research head, Geojit BNP Paribas Financial.
Read full article: Economic Times