Railway PSU stocks, including IRFC and RVNL, have shown a strong recovery after a significant dip from their 2024 highs. A potential 15-20% increase in capital expenditure (capex) for Indian Railways in the Union Budget 2025-26 has fueled investor optimism.
As these stocks regain momentum, let’s dive into what’s driving this recovery and what lies ahead.
Also read: RVNL Shares Plunge 44% from Record High
Why railway stocks are surging?
Government’s capex boost
Reports suggest that the Indian Railways’ budget allocation for FY26 could increase by ₹ 3 lakh crore, up from ₹ 2.65 lakh crore in FY25. This additional investment is expected to drive:
- Expansion of railway tracks
- Modernization of infrastructure
- Procurement of new rolling stock (locomotives, wagons, and coaches)
- Production of Vande Bharat trains
Market reaction to railway budget speculation
As the news of higher railway capex allocation surfaced, key railway PSU stocks saw a significant rally:
Private sector railway stocks, such as Jupiter Wagons and Titagarh Rail, also saw gains of 6% and 2-3%, respectively.
You may also read: IRFC emerges as lowest bidder to finance Rs 3167 crore
Market performance: IRFC & RVNL
IRFC stock movement
- Up 11% over the last three trading sessions
- Signed a leasing pact with NTPC for eight BOBR rakes worth ₹250 crore
- Emerged as the lowest (L1) bidder for financing a ₹3,167 crore coal mine project in Jharkhand
- Previously corrected 40% from its 52-week high of ₹229
RVNL stock movement
- Up 9% in intraday trade, rallying 13% over three days
- Secured a ₹3,622 crore contract with BSNL for Bharat Net development
- Previously fell 45% from its 52-week high of ₹647
Capex allocation: What’s ahead for Indian Railways?
Expected increase in railway budget
According to Moneycontrol, the government is likely to allocate ₹2.9-3 lakh crore as gross budgetary support (GBS) for railways in FY26. This investment aims to boost:
- Infrastructure development (new railway lines, electrification, and modern signalling)
- Production of Vande Bharat sleeper trains
- Higher public-private partnership (PPP) investments (targeting ₹10,000 crore in FY25, with 90% already achieved)
Long-term growth potential
Brokerages remain optimistic about railway PSU stocks, citing continued growth potential driven by:
- Kavach implementation (railway safety technology)
- PPP opportunities
- Modernization projects
Elara Capital has upgraded:
- Siemens to Buy (target: ₹7,120)
- ABB and BEML to Accumulate
- Amber Enterprises (target: ₹7,420)
Investment outlook: Should you buy railway PSU stocks?
Advantages of investing in railway PSU stocks
- Government-backed infrastructure push
- Consistent budget allocations for modernization
- Growing private sector involvement (PPP model)
- Rising demand for railway freight and high-speed rail services
Risks to watch out for
- High valuations post-rally
- Execution delays in railway projects
- Market corrections affecting PSU stocks
Bottom line
Railway PSU stocks like IRFC and RVNL are witnessing a strong recovery, driven by expectations of a higher railway budget allocation. While investor sentiment remains positive, it is essential to consider the valuation risks and potential execution challenges. If you’re looking for long-term investment opportunities, railway PSUs may be a promising bet, but short-term fluctuations are likely as the market reacts to budget announcements.
