Rail stocks rally ahead of the Budget

Mumbai: The shares of rail infrastructure developers have appreciated sharply on the domestic bourses during the past one-month on expectation that the forthcoming Railway Budget would allow greater foreign investment in the Indian railways and encourage more private participation in railway projects.

While the shares of Titagarh Wagons has soared 109.31 per cent in 2015 till date, the shares of other rail infrastructure developers like Texmaco Rail and Kalindee Rail have surged 20 per cent and 20.81 per cent respectively. Though the possibility of further reforms in the Indian rail sector looks likely in the forthcoming Railway Budget, market experts are however little cautious on these stocks as they are now trading at expensive valuations.

“Every year, we see a sharp rally in these stocks ahead of the budget. But this year, it is slightly more important since the union cabinet had already cleared a proposal allowing 100 per cent FDI in Indian railways. So it would be really interesting to see the follow up policies in the rail budget,” said Jagannadham Thunuguntla, head of fundamental research at Karvy Stock Broking.

Since the share prices of these companies have rallied quite sharply in recent weeks, Mr Thunuguntla feels it is time for investors to take some profits off the table. According to Ambareesh Baliga, market expert, any disappointment in the rail budget would lead to a sharp fall in the prices of these stocks.