Railway stocks logged an impressive rally on Wednesday, June 4, as investor optimism surged over capex-push in the sector. Stocks like IRFC, RVNL, IRCON International, Texmaco Rail, RailTel Corporation, RITES and more soared by 1% to nearly 14% on the closing bell. However, whether the bullish trend in railway stocks will continue in the medium term, will be keenly watched.
Railway Stocks Star Performers Of June 4:
On BSE, IRFC, the largest railway PSU stock, jumped nearly 3% to close at Rs 777.30 , while Rail Vikas Nigam (RVNL) climbed 6.5% to finish at Rs 429.90 apiece. The highest gains were seen in IRCON International (up 13.5%) RailTel (up 10.95%), and Texmaco Rail (up 7.6%).
Other railway stocks like Titagarh Rail Systems jumped 3.5%, RITES climbed 5.4%, and Container Corporation zoomed by 2.4%. BEML and IRCTC are up nearly 1%.
Why Railway stocks are rallying?
The latest GDP print of 7.4%, was driven by the government's boost to spending on both central and state levels, among which, the railway sector saw a significant push. Another key driving factor is the order book of rail companies.
"The 4q growth print partly reflects the back-loaded spending effect of the govt, both centre and States, led more by public capex spending," Madhavi Arora, Chief Economist, Emkay Global Financial Services added, "As a whole the growth has been in line with the govt estimates, with capital formation staying broadly steady."
During the Budget 2025, the central government announced a total capital expenditure of Rs 2,65,200 crore for railways for FY26. Notably, in both 2024-25 and 2025-26, the budgetary support was Rs 2,52,200 crore, financing 95% of the capital expenditure in these years.
Among the key initiatives announced in the Budget for driving railway sectors are --- the construction of new railway lines will proceed at an accelerated pace, with a budget of Rs 32,235.24 crore in FY 2025-26. Additionally, Rs 4,550 crore has been allocated for gauge conversion in FY 2025-26, Rolling stock has been capped at Rs 57,693 crore for FY 2025-26. A major push is also being made for the doubling of tracks, with a marked budget of Rs 32,000 crore in FY 2025-26.
Additionally, the Railways will introduce 50 new Namo Bharat trains connecting cities located 100-200 kilometers apart, each consisting of 16 coaches (both AC & Non AC Coaches). Furthermore, 100 Amrit Bharat trains(Non AC) will be launched, providing affordable and accessible travel options. A total of 200 Vande Bharat trains will also be introduced, further enhancing the high-speed travel network.
Also, in FY26, safety-related initiatives for the Railways will receive significant attention with a budget allocation of Rs 1,16,514 crore. This includes critical projects such as track renewal, signaling upgrades, telecom improvements, and the construction of new railway points and crossings. Over the coming years, 1,000 Road Over Bridges (RoBs) and Road Under Bridges (RuBs) will be constructed to enhance connectivity and safety. These announcements were made during the budget 2025.
For FY26, the government has estimated total revenue of Rs 2,99,059 crore, an increase of 7.7% over the revised estimate of 2024-25.
BUT will bullish trend in railway stocks continue?
The near term outlook for government's capex looks dicey, and that could play a role in the sentiment for railway stocks ahead.
"FY26 will be impacted by global uncertainties weighing on near term investment intentions, while easing urban incomes will weigh on private consumption. However, a part of this could be countered by continued monetary easing on both policy rates and regulatory frameworks, even as the fiscal policy will have limited growth pushing levers through conventional easing," Arora's note added.
Moreover, analysts at Kotak Institutional Equities said, "We note that government capex on railways and roads & highways and household capex on real estate were the biggest drivers of the strong growth in capex over FY2021-24. This can be seen in the increase in the share of government (including public sector capex) and household GFCF (as a% of GDP) in the past few years at the expense of the private sector. Exhibit 25 gives the breakdown of various components of investments."
However, the analysts expect central government capex to moderate in FY2026 given (1) a slowdown in the core areas of railways and roads & highways (flat capex for both in FY2026BE compared to FY2025RE) and (2) uncertainty in spending on certain non-traditional items. A large portion of the incremental capex of the central government will come from spending on non-traditional areas, which saw a large slippage in FY2025.
Lastly, they said, "We expect central government capex to slow down further in the medium term without new avenues of capex given lower scope of spending on the traditional areas of railways and roads & highways after (1) a meaningful upgrade of railway track and investment in rolling stock in the past few years and (2) rapid buildout of India's inter-state highway network."
Disclaimer: The recommendations made above are by market analysts and are not advised by either the author, nor Greynium Information Technologies. The author, nor the brokerage firm nor Greynium would be liable for any losses caused as a result of decisions based on this write-up. Goodreturns.in advises users to consult with certified experts before making any investment decision.
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