Railway stocks outperform

Average returns are twice that of Sensex this year

The half-dozen companies whose business fortunes are linked to India's rail networks have given higher returns than the market benchmark since the beginning of the year.

Railway stocks typically run up in the time leading to the railway budget, when the government decides how much money is to be spent on upgrading rail infrastructure. The rail budget is set to be announced in Parliament on February 26. The average return of the basket of six companies is 12.92 per cent over the past calendar year. This is more than three times the gain (3.76 per cent)  in the S&P BSE Sensex, the benchmark index.

The stocks are Titagarh Wagons, BEML, Kalindee Rail Nirman (Engineers), Texmaco Rail Engineering, Kernex Microsystems (India) and Hind Rectifiers. The average has been helped by Titagarh, up 37.9 per cent, but three of the five others have also given more than twice the Sensex returns. Kernex and Hind have given negative returns of 3.3 per cent and 2.8 per cent, respectively.

Jitendra Kumar Panda, managing director at Peerless Securities, notes the government has expressed a desire to focus on railways, with projects being talked of in collaboration with China and Japan. “Analysts feel the railways will play a key role in the economy.”

There are very few stocks which can be used to capitalise on this theme and they tend to run up in anticipation before the event,” he said.

Rahul Shah, vice-president, Motilal Oswal Securities, said one sees this ‘every time before the budget,’ adding the smaller rail stocks might not be the best way to bet on the rail story. “There are expectations of some momentum on expenditure but if an investor wants to play this theme, one could look at the larger companies,” he said.