Budget 2024: Multibagger railway stocks IRFC, RVNL, IRCTC and others dip up to 8% – here’s why

In today's trading session, multibagger railway stocks experienced a sharp decline due to the Union Budget 2024-2025's limited focus on the sector. Investors had expected substantial funding for railways, but Finance Minister Nirmala Sitharaman's budget speech barely addressed the railway sector, leading to significant drops in stock values.

Ircon International shares plunged 8% to ₹293.25 apiece, while Rail Vikas Nigam, Indian Railway Finance Corporation, RailTel Corporation of India, and Indian Railway Catering & Tourism Corporation saw declines between 3.3% and 6.2%.

Despite today's downturn, these stocks are still up by over 100% over the last one year. Railways have been a key area of focus for the government, with significant capital allocated for sector improvements. Investors expected this trend to continue under the Modi 3.0 budget.

The Union Budget 2024-2025 highlights nine key priorities: agriculture, employment, human resource development and social justice, manufacturing and services, urban development, energy security, infrastructure, innovation, research and development, and next-generation reforms.

“In the interim budget, we promised to present a detailed roadmap for our pursuit of ‘Viksit Bharat’. In line with the strategy set out in the interim budget, this budget envisages sustained efforts on the following nine priorities for generating ample opportunities for all,” said Nirmala Sitharaman in her budget speech.

Over the past decade, the Indian government has led a major modernisation drive to upgrade the railway system. This initiative includes a substantial expansion of metro networks in several cities and the introduction of 'Vande Bharat' trains starting in 2019.

In FY24, Indian Railways achieved record production levels for both locomotives and wagons, and by March 2024, 51 pairs of Vande Bharat trains had been launched. The Indian Railways 2023 report outlines plans to market these semi-high-speed Vande Bharat trains to European, South American, and East Asian markets by 2025–26, promoting 'Made in India' trains on an international stage.

With a network stretching over 68,584 route kilometers as of March 31, 2024, Indian Railways is the fourth-largest network globally under single management. Capital expenditure on railways has increased by 77% over the past five years, with the interim budget for 2024 allocating ₹2.62 lakh crore for ongoing investments in new lines, gauge conversions, and track doubling, according to the Economic Survey report.

Significant initiatives include the Amrit Bharat Station Scheme, launched in 2023 to continually upgrade stations, with 1,324 stations identified for development. Additionally, two dedicated freight corridors (DFCs) are in progress: the Eastern DFC, spanning 1,337 kilometers, and the Western DFC, extending 1,506 kilometers.

The establishment of the Dedicated Freight Corridor Corporation (DFCC) aims to boost the railway freight share in logistics from 27% to 45% by 2030. Annual freight carriage is projected to increase from 1,400 million tonnes (MT) to 3,000 MT by 2027, with the wagon fleet expanding from 336,900 to 500,000.

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