Why Rail Stocks have Outperformed in past One Month

Mumbai: Rail stocks have been in the limelight despite the subdued performance of the Indian stocks markets. Analysts say that higher government spending and a flurry of recent announcements by the Railways have lifted the sentiment in these stocks.

The shares of Titagarh Wagons, a supplier of wagons to the Railways, surged 44 per cent over the past one month. On the other hand, Sensex, the broad market indicator, lost around 1.8 per cent over the same period.

The shares of Kernex Microsystems, engaged in the manufacturing safety systems for the Railways, have gained over 30 per cent during the same time period. Other rail-related stocks Texmaco Limited and Kalindee Rail Nirman surged around 17-18 per cent in the past one month.

The Railways has an ambitious capital expenditure plan of Rs 1 lakh crore for the financial year 2015-16. This is 52 per cent more than the capex of the last fiscal (FY2014-15), says Bank of America Merrill Lynch.

However, so far this year the Railways has been behind in meeting the targeted capex as only 38 per cent of the planned capex for the year has been utilised so far, says Bank of America Merrill Lynch. Analysts expect the Railways to accelerate spending for the rest of the year.

JP Chaudhary, chairman of Titagarh Wagons, said a lot of activity has been happening in the sector. A tender of 15,000 wagons worth between Rs 4,000 crore and Rs 5,000 crore – the biggest in the past three years – has been issued recently, he added.

“The tender for Kanchrapara workshop which will manufacture new type of coaches has also been issued.”

Mr Chaudhary also referred to the agreement signed the Railways signed with GE and Alstom for two locomotive joint venture projects. India and Japan also recently signed an agreement for introduction of bullet train between Ahmedabad and Mumbai.

Analysts say, the Railways’ ambitious plan to redevelop 400 stations through a public-private partnership route is also expected to throw some good opportunities for the private sector companies.

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