Ircon Jumps 15%, RVNL, Railtel Hit Record Highs; Why Are Railway Stocks Rallying Today?

Shares of railway related stocks moved in an upward trajectory, the stocks jumped 2-15 per cent on September 11 on brighter outlook after the G20 Summit in New Delhi unveiled a multinational rail and port deal connecting the Middle East and South Asia. The plan is to counter China’s Belt and Road global infrastructure push with a US backup.

Among the stocks, Ircon International hit a new high of Rs 153.65, surging 15 per cent on the BSE in Monday’s intraday trade. The counter saw huge trading volumes with nearly 26 million equity shares cumulatively changing hands in the first 11 minutes of trade on the NSE and BSE.

Ircon is a leading turnkey construction company in the public sector (under Ministry of Railways). The company has executed projects operated in the areas of railway construction including ballast less track, electrification, tunneling, signal & telecommunication as well as leasing of locos, construction of roads, highways, commercial, industrial & residential buildings and complexes, airport runway and hangars, metro, and mass rapid transit system, etc.

Meanwhile, shares of Indian Railway Finance Corporation (IRFC), too, hit a new high of Rs 84.50, rising 10 per cent in the intraday trade. In the past seven trading days, it has zoomed 68 per cent. A sharp rally in the stock price of the company has taken the market capitalisation of IRFC above Rs 1 trillion. Currently, IRFC’s market cap stands at Rs 1.11 trillion, BSE data shows.

Shares of Rail Vikas Nigam also soared 10 per cent to Rs 178.90, while RITES gained 6 per cent to Rs 583.45 on the BSE in intraday trade. In comparison, the S&P BSE Sensex was up 0.35 per cent at 66,834 at 9:35 AM.

A new shipping and rail route connecting countries in the Middle East, South Asia and Europe was revealed at the G20 Summit. The US, India, Saudi Arabia, UAE, EU, and other G20 partners plan to explore a transport corridor for trade, energy, and data from India through the Middle East to Europe.

However, these are just announcements and no company has directly been awarded any specific contract for this corridor.

Railway stocks have been experiencing a strong upward trend in the past few days backed by fundamental triggers.

“Currently there is a huge momentum as far as the defence and railway companies are concerned. However, as far as investors and valuations are concerned, maybe we have run ahead of the curve,” Krishna Kumar Karwa of Emkay Global told CNBC-TV18.

“So, maybe there could be some consolidation, some price correction and so investors should be careful about investing in this segment of the market. I am not saying that opportunities are not there. I agree that the valuations, possibly are discounting maybe not even FY25-FY26, and my rule of thumb is that if you believe that the best discounted three years forward, then you should take some money off the table,” he added.