IRFC Shares Jump 9.9%, RVNL, IRCON International Hit 52-Week High; Why Are Railway Stocks Rallying?

Shares of railway companies were in focus on Monday’s trading session after the United States (US) signed an agreement with India, Middle Eastern countries, and the European Union (EU) with the goal of linking them through a system of railways and marine lines.

IRCON International Ltd shares rallied 19.3 per cent to hit a 52-week high of Rs 159.30 per share; Rail Vikas Nigam Ltd (RVNL) shares jumped 17.6 per cent to touch a 52-week high of Rs 191.65 per share; and Indian Railway Finance Corporation (IRFC) stock gained 10 per cent to hit a 52-week high of Rs 84.80 on the National Stock Exchange (NSE).

Prashanth Tapse, Senior VP (Research), Mehta Equities Ltd said, "If we look into the Ministry of Railways update, it says it had spent Rs 78,670 crores, i.e., 33 per cent of the Gross Budgetary Support (GBS) outlay of Rs 2.40 lakh crore for the financial year 2023–24. In this budgetary spending plan, IRFC will play a pivotal role as it is a dedicated financing arm of the Indian Railways for mobilising funds from domestic as well as overseas capital markets."

During the G20 summit on Saturday, Prime Minister Narendra Modi announced the India Middle East Europe Economic Corridor (IMEC) which includes signatories like Italy, France, Germany, the UAE, Saudi Arabia, and India. The project is a component of the Partnership for Global Infrastructure Investment programme.

The first-of-its-kind economic corridor will connect shipping and rail lines from India to Europe through the United Arab Emirates, Saudi Arabia, Jordan, and Israel.

The ambitious project aims to promote political collaboration and economic progress. The corridor would help increase trade, transport energy resources and enhance digital connectivity.

However, this is just a project announcement, and no company has been granted a contract so far.

According to Avinash Gorakshakar, Head of Research at Profitmart Securities, Indian railway companies like RVNL and Titagarh Wagons are likely to receive several orders to develop the rail network for the proposed IMEC.

Tapse said the Indian railway sector is set to flourish at an impressive compound annual growth rate (CAGR) of 7.5 per cent between 2022 and 2027. Hence, considering the industry rationales, we continue to remain optimistic about the sector's medium- to long-term growth prospects. We continue to advise investors to book profits gradually at higher levels," he added.