Railway stocks rise as cabinet clears projects of more than Rs24,000 crore

Titagarh Wagons was up 3.67%, Texmaco Rail and Engineering rose 1.44%, Kernex Microsystems India rose 2.28% and Kalindee Rail Nirman Engineers 2.04%

Photo: Aniruddha Chowdhury/Mint

Mumbai: Railway stocks traded higher on Thursday morning, after the Union Cabinet cleared railway projects worth over Rs.24,000 crore on Wednesday.

In an effort to ramp up capacity and decongest key routes for rail traffic, both freight and passenger, the cabinet approved nine projects estimated to cost Rs.24,374 crore.

Under the projects across the states of Assam, West Bengal, Jharkhand, Chhattisgarh, Maharashtra, Uttar Pradesh, Madhya Pradesh, Telangana, Andhra Pradesh and Odisha, railway tracks of a total length of 1,937.8km will be laid by the Indian Railways. The construction of the lines is expected to facilitate easier passenger travel and movement of freight items such as steel, coal and cement.

In reaction, Titagarh Wagons Ltd was up 3.67%, Texmaco Rail and Engineering Ltd rose 1.44%, Kernex Microsystems India Ltd rose 2.28%, Stone India Ltd rose 0.36% and Kalindee Rail Nirman Engineers Ltd 2.04%.

However, the gains may come off in days to come for most companies.

“People do not understand which orders will benefit which companies. Shares of wagon making companies are also rising in reaction, whereas the projects that are cleared involve construction of railway lines,” said Gaurav Dua, head of research at Sharekhan Ltd.

Typically, the orders for such construction may take a while to be placed as they need requisite approvals. Execution also takes time, pushing the profit accruals even further.

“Even for the companies that may bag orders, the benefits will only reflect in the second half of financial year 2017-18,” added Dua.