Railways PSU ETF delivers 16% in a week. Is this the right opportunity for portfolio diversification?

A railways PSU-based ETF gained around 16% in the past week, according to an analysis by ETMutualFunds. There are two passive funds focused on railway PSUs—one is an ETF and the other is an index fund.

The Groww Nifty India Railways PSU ETF rose 16.41% during this period, while the Groww Nifty India Railways PSU Index Fund, which also tracks the railway sector, delivered a 16.35% return.

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These schemes are benchmarked against the Nifty India Railways PSU Index – TRI, which surged 16.46% during the same period.

“The rally in railway stocks is part of sector rotation in the market, as PSU stocks—particularly those that were beaten down during the recent correction—are now outperforming,” said Sunny Agrawal, Head of Fundamental Research at SBI Securities, in a statement to ET Bureau.

Agrawal also noted that Tube Investments of India, during its recent earnings call, mentioned that railway order inflows are back on track, easing concerns about a slowdown in the sector.

According to a report by ET Bureau, shares of railway-related companies surged in a breakout rally on Friday, riding the bullish momentum in mid-cap and small-cap stocks amid optimism that Railway orders have resumed.

The report further highlighted that on Thursday, Rail Vikas Nigam, in a stock exchange disclosure, announced it had received a Rs 115.8 crore contract for upgradation work from Central Railway.

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Separately, Ircon International informed the exchanges on Thursday that it had received a Letter of Acceptance (LoA) from North Western Railway for the “Provision of Remote Diagnostic & Predictive Maintenance System”, valued at Rs 51.6 crore.

Despite the recent rally, shares of most railway-related companies remain 10–25% below their pre-correction levels, with the decline beginning in late September.

Apurva Sheth, Head of Research at Samco Securities, noted that defence and railway stocks moved in tandem during last year’s bull market, and a similar performance trend is playing out again now.