IRFC, RVNL, Railtel, IRCTC plunge over 50%; analysts see more consolidation

Railway stocks, including IRFC, RVNL, RailTel, IRCON, IRCTC, Titagarh Rail and others, have been under sustained selling pressure, correcting more than 50 per cent from their 2024 peaks

Railway stocks: Two years ago, the railway was the market’s most crowded theme, but it has now turned out to be a story of consolidation, testing investor patience. Railway stocks, including Indian Railway Finance Corporation (IRFC), Rail Vikas Nigam Limited (RVNL), RailTel Corporation of India, IRCON International, Titagarh Rail Systems, and others, have been under sustained selling pressure, with all these counters correcting more than 50 per cent from their 2024 peaks, reflecting a sharp shift in investor sentiment.

For instance, IRFC, once a retail favourite, slipped below the ₹100 mark on Monday for the first time since January 2024. The stock settled at ₹99.34 on the National Stock Exchange (NSE), down 56 per cent from its all-time high of ₹229, touched on July 14, 2024. IRFC's recently concluded OFS, in which the government divested a 2 per cent stake, witnessed subdued demand.

Mirroring the broader weakness in the railway pack, RVNL shares dropped below ₹300 on Monday -- a level seen for the first time since May 2024. At ₹299.45 (as of Monday), RVNL shares are down 53 per cent from the record high of ₹647, touched on July 15, 2024.

The selling pressure was not limited to the two heavyweights. Stocks such as RailTel Corporation of India, IRCON International, and Titagarh Rail Systems have also witnessed sharp corrections. While RailTel shares are down 53 per cent from their 2024 peak of ₹617.80, Titagarh Rail shares have tumbled 65 per cent from their all-time high of ₹1,896.95, hit on June 27, 2024. IRCON shares too have lost more than 60 per cent from their 2024 peak of ₹351.60.

Why are railway stocks underperforming?

On why railway stocks have emerged as the biggest wealth destroyers, Gaurav Sharma, Head of Research at Globe Capital, said that railway stocks are grappling with profit booking, execution concerns, and broader market volatility. He said that the entire railway sector has been underperforming for a long time as its three core pillars, infrastructure, technology, and wagons, are struggling to deliver.

While railway sector stocks witnessed a significant rally a couple of years ago, they are, by and large, in a phase of consolidation, he said, and recommended “staying away from the pack.”

The trend remains the same for Indian Railway Catering and Tourism Corporation (IRCTC), which maintains its monopolistic position as the only entity authorised by the Ministry of Railways to sell railway tickets online. IRCTC shares have disappointed investors by erasing 50 per cent of their investment from the 2024 high of ₹1,138.90.

RITES shares have crashed 75 per cent from their all-time high of ₹825.95, touched in February 2024. Texmaco Rail and Jupiter Wagons have lost 65 per cent each from their all-time high levels of ₹296.49 and ₹748.10 (both touched in July 2024), respectively.

‘Companies hit by higher metal prices’

Sharma said that rising metal prices are also taking a toll on the railway companies and thus restricting any meaningful gains. He said that railway companies could continue to face pressure due to this.

“Rising metal prices are expected to exert additional pressure on railway companies, thus limiting any immediate upside,” he said.

Sharma further said that though railway companies continue to secure new orders, a meaningful recovery is not expected anytime soon and that the “consolidation phase could persist for the next two to three quarters or even longer.”

‘Rising capex play for long term’

Kranthi Bathini, Director of Equity Strategy at WealthMills Securities, said that railway stocks have been in a downtrend for more than two years after witnessing strong momentum, during which many of them delivered multifold returns to investors. He noted that the railway sector is largely domestically driven and stands to benefit from increased capital expenditure (capex) in the long run.

He recommended buying stocks with strong fundamentals in a staggered manner with a long-term view, but said that stocks may experience more consolidation in the near term.

“Railway stocks have corrected by more than 50 per cent. Over the past year, broader market weakness has also impacted the railway sector. My recommendation is to accumulate railway stocks in a staggered manner for the long term, at least three to five years,” he said.

Notably, the Modi government allocated a record capex of ₹2,93,030 crore for Indian Railways in the Union Budget 2026–27.      =============================  Disclaimer: View and outlook shared belong to the respective brokerages/analysts and are not endorsed by Business Standard. Readers' discretion is advised.