As the Union Budget 2025 approaches, investors are weighing whether it’s the right moment to buy shares of Indian railway companies such as Indian Railway Catering and Tourism Corporation (IRCTC), Indian Railway Finance Corporation (IRFC), Rail Vikas Nigam (RVNL), and Railtel Corporation of India.
Recent Performance of Railway Stocks
The performance of railway stocks has been under pressure in recent months. IRCTC has seen its share price decline since May, while IRFC and Railtel stocks have been falling since August. RVNL has also struggled, with a downward trend since September.
Union Budget 2025 and Its Potential Impact on Railway Stocks
The Indian railway sector is expected to gain a boost in the Union Budget 2025, particularly in the area of infrastructure modernization to meet rising passenger demand. Reports suggest that Indian Railways is focusing on enhancing passenger services with technological upgrades, which could positively impact railway stocks.
According to Mahesh M Ojha, AVP of research at Hensex Securities, the upcoming Union Budget is likely to be infrastructure-focused, which would benefit railway companies. However, he also cautioned that many railway stocks might have limited upside potential due to constraints on capital expenditure (CAPEX). He recommends considering these stocks for short-term investments rather than medium- or long-term holdings. Ojha specifically highlighted RVNL and Railtel as stocks to watch ahead of the budget.
Short-Term to Medium-Term Outlook
Manish Chowdhury, head of research at StoxBox, noted that the correction in railway stocks over recent months has made the risk-reward ratio more favorable, especially with the Union Budget on the horizon. He believes that after the general and state elections, the execution of key projects like the Vande Bharat network expansion, the Kavach system, and bullet and metro train projects is likely to pick up speed. As a result, a higher CAPEX allotment for the railways could be included in the upcoming budget, which would further boost railway stocks.
Chowdhury is optimistic about railway companies’ performance in Q2FY25 and suggests that IRFC, Railtel, and RVNL could be good additions to a portfolio for a one-year investment horizon.
Concerns Over Earnings and Stock Performance
However, some experts argue that the recent fall in railway stock prices is linked to disappointing earnings in Q1 and Q2, which saw a lack of margin growth, top-line, and bottom-line improvements. Prashanth Tapse, Senior VP (Research) at Mehta Equities, expressed caution, stating that they would prefer to wait for Q3 earnings before making any decisions on railway stocks. Tapse also pointed out that the government is consistently focused on railway infrastructure improvements, and new announcements are made every quarter, meaning the budget may not be the primary catalyst for stock movements.
