What is causing the recent rally in railway stocks like IRCTC, Texmaco and Ircon?
The Indian Railways is the lifeline of millions in the country. The livelihoods of many are dependent on this vast ecosystem crisscrossing the length and breadth of the country.
Now, companies having exposure to this sector are witnessing a windfall in terms of share price growth too. Particularly, these companies have had a stellar run in 2023 so far by clocking gains of almost 83%.
So, what is causing this unprecedented rally in the share prices of these companies associated with the railway sector? Is it Government support? Is it rising demand? Let’s try and decode!
Indian Railway stocks: Reasons for rally
High budgetary allocation: One of the primary reasons for the rally in railway stocks in 2023 has been the highest ever budgetary allocation in a Union Budget. In the Union Budget, the Finance Minister allocated a massive Rs 2.4 lakh crores for the purpose of development, maintenance and expansion of the railway network in the country.
Consequently, this has had a positive rub-on effect on railway stocks which have propelled them to such high levels in 2023.
Strong manufacturing push: Another probable cause for the growth in railway stocks in recent times has been the concerted efforts of the Government to manufacture railway coaches.
For instance, in April the Government announced the production of 120 Vande Bharat trains which will commence in August 2023.
Moreover, not just the Central Government, orders from state governments like Gujarat and Telengana are also pouring in. For example, RVNL bagged two orders from the Gujarat Metro Rail Corporation.
High dividend yields: Coupled with a strong order book and a clear pathway for future growth, these railway stocks also provide a sense of security and regular income in the form of high dividend yields.
In a volatile economic environment and a topsy-turvy share market, companies with dividend yields provide stability. Some of these stocks have a dividend yield of more than 5%.
Consequently, this certainty of regular income has made these railway stocks an attractive choice for investors in recent times.
Now, let’s steal a glance on how some of the prominent stocks in the railway sector have performed.
Indian Railway stocks: Performance in 2023
(as of 8th June, 2023)
This is not investment advice. Investments in the securities market are subject to market risk, read all the related documents carefully before investing. Past performance is not indicative of future returns.