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.Â
As these stocks regain momentum, let’s dive into what’s driving this recovery and what lies ahead.
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.
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.
