A dismal show from railway stocks in the run up to Budget. Can Sitharaman put them back on track?

Railway stocks typically rally in anticipation of the Budget, but this time, the story is different. Not a single railway stock has moved into positive territory since the year began, marking a stark contrast to past pre-Budget trends.

In fact, some of the stocks have fallen over 40% from their respective highs given the broader correction in the market. While Oriental, Ircon Jupiter Wagons and Titagarh fell nearly 50% from their 52-week highs, RITES, BEML, Ramkrishna Forgings, Texmaco Rail, IRFC slumped over 30% from the highs.

On a year-to-date basis, Oriental Rail, Jupiter Wagons, Titagarh Railsystems, RITES and BEML all have lost over 10%. IRFC, RailTel Corp, Ircon and a few others, meanwhile, declined over 5%. IRCTC, on the other hand , is trading flat if we consider the one month return period.



The poor show of these stocks can be attributed to the downturn the Indian market is going through, mainly due to expensive valuations and solid run up in the last few years.

Since hitting a peak in September last year, benchmark Nifty fell about 14% and this year, the 50-stock index is already down over nearly 3%.

The slowdown in corporate earnings is also weighing on the markets. Top Indian companies reported their weakest quarterly performance in over four years for July-September quarter and the December quarter results, albeit in line with expectations, are likely to subdued.

However, the outlook for railway stocks going forward inspires some confidence for investors. Reports indicate the railway sector is poised to receive a substantial boost in FY26 with a projected 15-20% increase in capex spending. The focus areas will be laying new tracks, upgrading existing ones, and commissioning upgraded railway stations.

Given the likely bump in spending, analysts expect pick-up in order inflow in the fourth quarter, which was set against a slow start to capex spending in FY25 given elections-led delay.

Order momentum may pick-up further in FY26, led by new offerings in rolling stock, opportunity worth Rs 4.5 trillion in network expansion and large pipeline for Kavach, said Elara Capital. India's railway transition will be led by modernization, upgradation and exports in the current fiscal year.

Elara prefers RITES and KECI in this space, given that the following stocks have underperformed the Nifty in the past month. The brokerage has also upgraded SIEM to buy from accumulate given the positive outlook in the near term.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)