Budget blues: Dim outlook for rail-linked stocks

Kernex Microsystems (India), Titagarh Wagons, Kalindee Rail Nirman (Engineers), Hind Rectifiers and Stone India are trading lower by 7-9.5% on BSE.

Stocks of companies that would have benefited from substantial railway investment fell on Tuesday, owing to the lack of major capital expenditure plans or big-bang infrastructure investments in the Railway Budget.

Stocks in the segment fell an average 7.83 per cent; four of the nine stocks ended with double-digit losses. With a fall of 16.21 per cent, Stone India was the biggest loser. Kernex Microsystems declined 15.13 per cent, Kalindee Rail Nirman 11.62 per cent and Texmaco Rail Engineering 11.36 per cent. Hind Rectifiers, Titagarh Wagons, BEML and Bartronics India fell 0.62-8.82 per cent.

Zicom Electronic Security Systems, which rose 4.24 per cent, was an exception to the trend. The company manufactures security systems. In the past, it has bid for railway orders.

Chokkalingam G, executive director and chief investment officer at FCH Centrum Wealth Managers, said the fall in railway stocks might have been a mix of disappointment and unwinding of existing positions.     Turn to TSI, Page 2 >

“People may have built up some long positions, in anticipation of the Budget. The lack of a great deal of capex announcements, coupled with the general weak sentiment in the market, could have led to the decline,” he said.

On Tuesday, the S&P BSE Sensex fell 316.55 points, or 1.64 per cent, to close at 19,015.14. The mid-cap and small-cap indices, which account for most of these stocks, fell 1.76 per cent and 2.43 per cent, respectively.

Announcements in the Railway Budget included a rise of about five per cent in freight charges, in line with the increase in fuel prices. The fuel-linked component, effective April 1, would be revised twice every year. While passenger fares remained unchanged, reservation fees and Tatkal charges were raised.

In the absence of increased spending by the railways, the outlook for these stocks in the days ahead isn’t too positive.

Phani Sekhar, fund manager at Angel Broking, was not too bullish on the segment. “No big-bang spending is expected in the next two or three years, except maybe some marginal spending on maintenance. We are not too upbeat on railway stocks,” he said.

“Unless investments and capex happens, order books wouldn’t grow,” said J Venkatesan, fund manager, Sundaram Mutual Fund.