The recent performance of railway Public Sector Undertaking (PSU) stocks has been notable, with significant corrections observed in stocks such as Indian Railway Finance Corporation (IRFC), RailTel Corporation, and Rail Vikas Nigam Ltd (RVNL). After previously delivering impressive returns, these stocks have faced increased volatility, with declines of nearly 50% from their peak values within the past year.
Current Market Trends for Railway Stocks
The sell-off in railway PSU shares intensified after the recent Union Budget, which failed to introduce anticipated sector-specific reforms. The budget for FY26 maintained the capital expenditure for Indian Railways at ₹2.52 lakh crore, consistent with the previous year’s allocation. This lack of significant investment has raised concerns among investors regarding the growth prospects of these stocks.
- IRFC: Down 46% from its 52-week high.
- RailTel: Dropped 52% from its peak.
- RVNL: Fell by 47% from its high.
Analysts’ Perspectives on Future Growth
Market experts express concerns about the future growth of railway PSU stocks. According to Kotak Institutional Equities, a notable slowdown in capital expenditure could occur without improvements in Indian Railways’ capacity to undertake larger projects, such as high-speed rail networks. They suggest that the valuation multiples of these stocks appear overstated, indicating unrealistic expectations for revenue and profit growth.
Which Railway Stock to Choose: IRFC, RailTel, or RVNL?
For investors keen on railway stocks, the focus on infrastructure development is crucial. Prashanth Tapse, a Senior Vice President at Mehta Equities, highlights IRFC as a strong option for conservative investors due to its stable business model that heavily finances railway projects.
- IRFC thrives on leasing rolling stock and infrastructure, ensuring steady revenue and growth.
- RVNL, on the other hand, presents an appealing option for those willing to take on short-term risks, as it plays a vital role in modernizing Indian Railways through projects like track electrification and station upgrades.
Tapse estimates that IRFC could reach a price target of ₹170-180 within the next year, while RVNL might hit ₹420-450.
Technical Analysis Insights
Recent trends suggest that railway stocks are stabilizing after notable corrections. Ruchit Jain, Vice President of Equity Technical Research at Motilal Oswal, believes that these stocks are nearing support levels, presenting potential buying opportunities.
- IRFC: Currently showing support around ₹115, with a possibility of rallying towards its 200-Day Moving Average (DMA) of ₹140.
- RailTel: The stock struggles to maintain levels above key moving averages, indicating a bearish trend.
- RVNL: Facing resistance near its 50-day EMA, with ₹355 as a crucial level to watch for potential upward movement.
Conclusion: Best Stock to Buy Now
Among the trio of railway PSU stocks, IRFC emerges as the most promising investment choice. According to Hardik Matalia, a Derivative Analyst at Choice Broking, IRFC exhibits stability close to support levels, potentially outperforming its counterparts if it maintains values above ₹130. Investors are encouraged to consider accumulating IRFC shares now, with an eye toward a target range of ₹145-155 and a stop-loss at ₹120.
Investing in railway PSU stocks requires careful consideration of market dynamics and ongoing governmental support for infrastructure development. As these stocks navigate through corrections, they present both challenges and opportunities for savvy investors.
