Railway vendors' shares begin annual pre-Budget rise

As in each year, the share prices of companies whose business is related to the railways have started moving up, ahead of the latter’s budget, to be presented on February 24.

The share prices of Kalindee Rail Nirman Engineers, Simplex Casting, Kernex Microsystems, Titagarh Wagons, Texmaco, Stone India and Hind Rectifiers witnessed a sharp rise of between five to 20 per cent in today’s trading. Those of public sector companies like Container Corporation, BEML and Bharat Heavy Electricals witnessed modest gains: these, too, make products for the railways.

GATHERING STEAM SHARE PRICE ON BSE IN RS
Company	Price	% Rise
Hind Rectifiers	70.00	20.00
Titagarh Wagon	463.50	16.19
Texmaco	162.55	12.70
Stone India	71.90	10.00
Simplex Casting	88.05	9.20
Kalindee Rail	208.00	5.00
Kernex Micro	181.15	5.00
Price rise over Feb 10

“Over the past few years, there have been no negative surprises in the Railway Budget and expectations are high. Prior to the Budget, these stocks are safe bets, as only these companies get all the railway-related orders for whatever initiatives are announced in the Budget,” said equity advisor S P Tulsian.

He said these stocks generally witness a sharp run-up ahead of the Budget and fall significantly after the announcements.

There was an up move of five to 28 per cent in these stocks in three trading sessions after June 20 last year, before minister Mamata Banarjee was to present her first budget on July 3, following the victory of the United Progressive Alliance in Parliament elections. The stocks cooled off significantly after the budget.

Kalindee Rail, involved in installation of signalling and telecommunication projects and execution of gauge conversion, gained nearly 30 per cent in 10 trading sessions and was trading at over Rs 500 a share, before then railway minister Lalu Prasad was to present the Budget in 2008. The stock, however, slipped to around Rs 350 within the next few days, post-Budget.

In 2008, Kernex Micro, involved in monopoly business of train anti-collusion dividers, gained around 45 per cent in 10 trading sessions from a level of Rs 160 to Rs 230. In the 10 trading sessions, post-budget, the stock slipped back to around Rs 155.

Prior to the 2007 Railway Budget, Kernex Micro had gained 17 per cent in the five trading sessions from Rs 145, and post-Budget, the stock was back to the same level. In 2007, Kalindee Rail had gained 23 per cent in 10 trading sessions from Rs 160 prior to the Budget announcements. The stock was again traded at around Rs 160 in the next three trading sessions. A similar pattern was witnessed in 2006 as well and stocks which had gained significantly prior to the Budget fell sharply.

Tulsian said the government had said it would spend Rs 3,500 crore on anti-train collision devices. But, a majority of the money is still unused and Kernex Microsystems is the only listed company in the country involved in this business. The cost rises over three-fold if these devices are imported.