🚅 The Rally of Railway Stocks Explained
What does the future hold for India's railway sector? Read on.
Last week was a hit for railway stocks:
IRCTC reached a 52-week high of Rs. 958.30
IRFC hit a record high of Rs. 114
RVNL reached a lifetime high of Rs. 207
IRCON hit a new peak of Rs. 194
What's driving this rally?
Read on.
Investors are anticipating that the Union Budget 2024 will allocate a record high for the sector.
And, why not?
The government is going all in on infrastructure development.
It recently declared an investment of Rs. 7 lakh crore for the development of rail infrastructure.
The railways' capital expenditure is expected to go up by 25% from the 2023-24 budget estimate.
Yes, in Budget 2023-24, the railways capex was Rs. 2,40,000 crore. This year, it is expected to be Rs. 3,00,000 crore.
What is this capex for?
Well, this money will be used for:
Development of freight corridors for efficient transportation of goods and commodities
Modernisation of railway fleet
Development of 300-400 Vande Bharat trains, including sleeper couches
50,000 kms of new train tracks to improve connectivity
And it's not all about development.
It is also about safety.
Budget 2024-25 may double the safety budget to reach its Mission Zero Accidents goal.
This comes after two years of stagnant safety budget at Rs. 11,000 crore.
Yet another growth driver for this sector is the ‘Make in India’ mission.
The government is going to launch a PLI scheme of Rs. 800-1200 crore spread over three years to boost domestic manufacturing and reduce dependency on imports.
To further become self-sufficient, Indian Railways is exploring public-private partnerships (PPP) to attract private investments to redevelop railway stations.
As railway stations have the highest footfall amongst all modes of transport, there is huge potential to capitalise on the real estate assets.
But, but.
Planning is just not it.
It all comes down to execution.
In FY 23-24, India has built only 38% of roads planned so far.
In Budget 2023-24, it had planned 13,800 kms of highway for Rs. 2.5 lakh crore.
But by November 2023, only 5,248 kms of highway were built for Rs. 1.7 lakh crore.
Will this Budget be any different? Will we be able to execute all that we plan?
Do you think Vande Bharat can change the railway landscape of India?
Let us know in the comments!
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