Railway stocks are attracting investor attention as expectations rise for a significant increase in the sector’s budgetary allocation. This anticipation follows three years of limited growth, and comes as the railways are already utilizing over 80 percent of its current capital outlay.
Increased Investment Anticipated
Analysts predict a 5 to 10 percent growth in budgetary allocation for FY27, with companies like IRFC, RVNL, IRCON, IRCTC, Titagarh Rail Systems, and Jupiter Wagons currently in focus. A figure exceeding 10 percent could lead to a positive reassessment of these companies.
Shifting Priorities
Brokerages suggest the upcoming budget will prioritize capacity expansion, the addition of rolling stock, and safety upgrades. Estimates for gross budgetary support range from Rs 2.65 lakh crore to Rs 2.8 lakh crore, with a stronger allocation signaling a firm commitment to infrastructure development.
Specific areas expected to receive significant investment include safety systems like Kavach, station upgrades, track doubling to reduce congestion, and continued development of the bullet train corridor. Bajaj Broking anticipates a greater emphasis on station modernization and faster project completion.
Focus on Efficiency and Modernization
With railway electrification nearing completion, future capital is likely to be directed towards new lines, gauge conversions, expansion of the Dedicated Freight Corridor, and the development of port-linked economic corridors. The overarching goal remains to reduce logistics costs, which currently exceed the 6 to 7 percent benchmark seen in more advanced economies.
Higher allocations are expected to benefit a wide range of companies, including Kavach providers like HBL Engineering, Kernex Microsystems, Siemens, and CG Power through GG Tronics. Coach manufacturers such as BEML, BHEL, Siemens, and Titagarh Rail Systems could also see increased demand with a push for train modernization.
Frequently Asked Questions
What is driving the expectation of increased railway investment?
The expectation stems from three years of muted growth in the sector, coupled with the railways already utilizing more than 80 percent of this year’s capital outlay.
Which companies are likely to benefit from a larger budget allocation?
IRFC, RVNL, IRCON, IRCTC, Titagarh Rail Systems, and Jupiter Wagons are specifically highlighted as being in focus, along with companies involved in safety systems like Kavach and coach manufacturing.
What are the key areas of focus for the anticipated investment?
Capacity expansion, rolling stock additions, safety upgrades, station modernization, new lines, gauge conversions, and the Dedicated Freight Corridor expansion are all expected to be prioritized.
Will these anticipated investments successfully lower logistics costs in India?
