Rail Budget 2016-17: Stock Market in two minds about how to react

SENSEX sheds 56 points as Railway Minister Suresh Prabhu begins his Railway Budget 2016-17 speech in the Parliament

New Delhi: The stock market quickly showed mix reaction to Suresh Prabhu’s second Rail Budget, with the Sensex falling 30-odd points minutes after the Railway Minister started his speech in Parliament. Dalal Street was expecting Prabhu to increase capital outlay substantially to improve railway infrastructure and safety measures.

Stocks of railway related companies like Titagarh Wagons, Timken India, Texmaco Rail and Engineering, BEML, Kalindee Rail, Alstom T&D India, Hind Rectifiers and Stone India were trading mixed today after a rally seen yesterday in run up to the Budget.

Titagarh Wagons was down 2.06 per cent at Rs 121.20, Timken India up 1.56 per cent at Rs 447, Texmaco down 3.7 per cent at Rs 126.20, BEML down 0.53 per cent at Rs 1,012.60, Kalindee down 3.56 per cent at Rs 130.20 and Stone India up 1.77 per cent at Rs 69.15.

Expectations are higher from Railway Budget than the Union Budget as the the government has laid thrust on improving railway infrastructure for sprucing up economic growth.

Railway Minister Suresh Prabhu has announced plans to spend $132 billion on railways in the next five years. There are expectations that he is likely to increase the overall capital outlay for Indian railways by 20-25 per cent to Rs 1.25 lakh crore, with a thrust likely on improving rail infrastructure, safety and upgrading the current rolling stock .

Shares of railway-related technology firms MIC Electronics, Zicom Electronic and Stone India advanced 5.94 per cent, 3.02 per cent and 1.40 per cent, respectively. Some of the prominent names in this space have fallen as much as 80 per cent this year. Most of them have fallen in the runup to the Rail Budget.

Rail Stocks BSE“There has been a delayed pre-budget rally in the railway stocks. But the other part is that these stocks did not fall as much as the rest of the midcap universe. All of these stocks have not fallen in the same magnitude as other smallcap and midcap stocks, which have actually cracked,” said Sandip Sabharwal of www.asksandipsabharwal.com.

Sabharwal expects companies linked to the railways to benefit largely from the strong order inflow expected from the Ministry of Railways. “There is expectation that the Rail Budget will lay out some capital expenditure plans and order flows could be pretty strong going forward,” he said.

The Rail Budget, which will be presented on Thursday, is unlikely to see any fare hike, but a slew of new measures, including a semi-fast train are on the anvil, industry trackers said.

Analysts also expect the government to rationalise some of the concessions in the Budget, an ET Bureau report said.

Nirav Sheth, HoR, Institutional Equities, Edelweiss Financials, expects the EPC (engineering, procurement & construction) companies to emerge as the major beneficiaries of the Budget.

“My sense is that lot of these EPC companies, if you think there is enough orders coming in from the Railways, will try and figure out how build railway tracks, and benefit,” he said, adding that “what seems to be cyclical at this point of time could well turn out to be structural. You can have years of order book remaining robust.”

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