Railway stocks rebound up to 22% on hopes of BJP leading NDA coalition

Railway stocks in focus: Shares of state-owned railway companies bounced back sharply in the intraday trade on Wednesday, June 5, amid reports of the Bharatiya Janata Party (BJP)-led National Democratic Alliance (NDA) forming government.

Shares of Ircon International, for instance, rebounded 16.3 per cent from the day's low of Rs 213.15 to hit an intraday high of Rs 248 per share. Similarly, shares of Rail Vikas Nigam Ltd (RVNL) bounced back 20 per cent intraday, Texmaco Rail and Engineering 11 per cent, Jupiter Wagons 22 per cent, RailTel Corp 13 per cent, Ramkrishna Forgings 6 per cent, and IRCTC 9.7 per cent.

At 1:45 PM, the benchmark BSE Sensex was quoting 2.3 per cent, or 1,700 points, higher at 73,780 levels.

According to reports, Prime Minister Narendra Modi will likely be sworn-in as the prime minister for a third consecutive term on June 8 as the NDA won support from Chandrababu Naidu-led (Telugu Desam Party), while Janata Dal (United)'s Nitish Kumar flew in Delhi to hold coalition talks.

Railway stocks had corrected sharply on Tuesday after the results of 2024 Lok Sabha elections showed that the BJP had failed to cross the halfway mark of 272-seats on its own. The NDA, however, had won 292 seats of the total 543 seats.

Individually, Titagarh Railways had plummeted nearly 20 per cent, RVNL 13 per cent, Texmaco Rail and Engineering 17 per cent, and RailTel Corp 15.2 per cent.

That said, according to analysts at HDFC Securities, railway PSUs may remain under pressure in the near-term as uncertainty over the coalition government's stability may not support the pack's steep valuations.

"The fractured mandate of the Lok Sabha election result may remain an overhang on PSU stocks. Sectors with over-heated valuations and recent sharp outperformance viz. Industrials, Railways, and Defence may see more moderation in valuations before they become attractive again from the risk-reward perspective," said those at Motilal Oswal Financial Services.