Railway stocks gather steam as Suresh Prabhu takes charge

Texmaco Rail, BEML, Titagarh Wagons, Kalindee Rail Nirman (Engineers), Kernex Microsystems (India) and Stone India moved up 2-5% on the BSE in intra-day deals

Shares of railway-related companies gained 2.5 to nine per cent on the BSE in an otherwise subdued market on Monday, a day after Suresh Prabhu replaced D V Sadananda Gowda as railway minister.

The BSE Sensex and Nifty hit record highs on Monday as Prime Minister Narendra Modi’s push to expand his cabinet raised further hopes for economic reforms, but gave up most of their gains towards the end of the session as investors booked profits.

The Sensex rose as much as 0.57 per cent to a record high of 28,027.96, later closing 6.10 points up, to end at 27,874.73. The broader Nifty edged up 0.09 per cent, or 7.25 points, to end at 8,344.25, also marking its record close.

Texmaco Rail & Engineering, BEML, Titagarh Wagons, Kalindee Rail Nirman (Engineers), Kernex Microsystems (India) and Stone India were among the top gainers.

“With the new Railway Minister taking charge, there are a lot of expectations that there will be policy/reform-oriented announcements after a month like formulation of tenders and upgradation of infrastructure for the railway industry overall. The core dynamics, however, will not change overnight and the up move is more sentiment driven. It will take time for the cash flow dynamics to change,” said Mayuresh Joshi, vice-president (institutional), Angel Broking.

The markets have been expecting the Modi-led government to undertake policy reforms that will benefit the companies in this sector. However, analysts prefer to remain on the sideline till the government spells out the policy/reform measures pertaining to this sector.

“Structurally, I think we need to give railways some time given the cash drain we have seen in the past. Even then, one needs to be selective while investing in this sector. One needs to wait for the Railway Budget and reform/policy related announcements before taking an investment call here,” Joshi says.

Besides the hope-driven rally in most of these stocks, select counters have seen investor interest on the back of fresh order intake. Stone India, for instance, has zoomed nearly 52 per cent to Rs 66 levels from Rs 43 on October 10. Railway system and product manufacturer has bagged multiple orders in the past month.

On October 22, the company secured orders from Chittaranjan Locomotive Works, Indian Railways valued at approximately Rs 2 crore, for supply of their indigenously developed computerised brake system for three-phase electric locomotives. The company had also received first export order from China.

In the past month, most of these stocks have outperformed the market by gaining nearly 52 per cent, as compared to six per cent rise in S&P BSE Sensex. Titagarh Wagons and Texmaco Rail have gained nearly 30 per cent each, while Kalindee Rail and BEML have surged around 25 per cent each in the past one month.