Listless Rail Budget pushes railway shares off track

Shares of Titagarh Wagons, Kalindee Rail Nirman, and Hind Rectifiers shed up to 10% during the day

The interim Railway Budget failed to impress investors who pared their holdings in shares of firms that benefit from railway spending soon after the announcements. Shares of Titagarh Wagons, Kalindee Rail Nirman, and Hind Rectifiers shed up to 10 per cent during the day.

“No major announcements were made in this budget. This has been the case for the past few years, where we have not seen any major allocations being made for the expansion of the railways sector,” said Alex Mathew, head of research, Geojit BNP Paribas Financial Services.

On Wednesday, Hind Rectifiers saw the highest decline of 10.1 per cent to Rs 31.65. Texmaco Rail and Engineering dropped 4.2 per cent to Rs 41.20. Kernex Microsystems fell four per cent to Rs 35.60. Titagarh Wagons was down 1.3 per cent to Rs 103.90.

State-owned BEML bucked the trend, ending marginally higher over the previous day. Market participants said these stocks, while liquid, only see significant trading activity around the budget announcement.

“We have not been very bullish on railway stocks for a long time. The railways have not been profitable and the budget for the sector has been on the decline. If the client’s (railways') budget has been falling, how can the suppliers (railway companies) do well?,” asked Yogesh Nagaonkar, head of equity (institutional broking), Bonanza Portfolio.

“The railways had been profitable under the leadership of Lalu Prasad Yadav. But ever since his departure, the sector has been suffering. The railways are reportedly losing 0.5 per cent market share each year to roadways,” said the head of research of an Indian brokerage.

Analysts said the entry of foreign players could help the sector. The government is considering a proposal to allow foreign direct investment for which the home ministry has given in-principle approval. At present, foreign participation in the sector is banned.