Railway shares such as Rail Vikas Nigam Ltd (RVNL), Titagarh Rail Systems Ltd, Ircon International Ltd, Indian Railway Finance Corporation Ltd (IRFC), RITES Ltd, Indian Railway Catering & Tourism Corporation Ltd (IRCTC), Railtel Corporation of India Ltd, and Jupiter Wagons Ltd have captured investor attention.
As the Union Budget 2024 looms, the market is abuzz with expectations of substantial budgetary incentives for the railway sector.
Capex and infrastructure boost
Market experts highlight the pivotal role of capital expenditure (capex) as a catalyst for private investment.
They anticipate the government will channel significant funds into key infrastructure projects, particularly in the railway and metro rail sectors.
The expectation aligns with the broader push to enhance the railway network's safety and efficiency. The Kavach safety-related capex, conspicuously absent from the Interim Budget 2024, is deemed critical in the current scenario.
"Investors should also look forward to expanded investment in metro rail projects and the Namo Bharat initiative, potentially extending to additional cities," experts note.
Budget expectations and sectoral impact
Care Ratings projects a 12-15% increase in budgetary allocation for railways, pegging it at Rs 2.75 lakh crore.
This would facilitate the augmentation of Vande Bharat trains by 50-60 times and fuel substantial investments in rolling stock, track construction, and railway safety.
The introduction of a hybrid annuity model for railway capex and a Production Linked Incentive (PLI) scheme for indigenous manufacturing of railway ancillary parts are also on the horizon.
Mehta Securities views the forthcoming Union Budget as an extension of the Interim Budget, emphasizing the robust order books and improving earnings quality within the railway sector.
In the interim Budget, Finance Minister Nirmala Sitharaman announced a capital outlay of Rs 2.55 lakh crore for railways, a nearly ninefold increase from the FY 2013-14 allocation.
"The Finance Minister highlighted three major economic railway corridor programs under the PM Gati Shakti initiative, aimed at enabling multi-modal connectivity," Mehta Securities observed.
Cautious optimism
InCred projects a 5-10% decline in road and railway allocations for FY25, though it anticipates strategic announcements outlining a five-year roadmap for the sector. Reliance Securities concurs, expecting higher railway allocations to spur infrastructure order conversions.
However, the brokerage remains cautious regarding sectors like railways and defence, given the recent market rally.
As investors await the Union Budget 2024, the focus remains on how these anticipated financial boosts and strategic initiatives will reshape the railway landscape, propelling the sector toward modernisation and enhanced connectivity.
InCred Equities highlights the pivotal role of capital expenditure (capex) as a catalyst for private investment. The firm anticipates the government will channel significant funds into key infrastructure projects, particularly in the railway and metro rail sectors.
This expectation aligns with the broader push to enhance the railway network's safety and efficiency.
The Kavach safety-related capex, conspicuously absent from the Interim Budget 2024, is deemed critical in the current scenario.
"Investors should also look forward to expanded investment in metro rail projects and the Namo Bharat initiative, potentially extending to additional cities," InCred notes.
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