Railway PSU stocks give zero return in one month. Should you buy, or sell?

Stocks to buy: Despite frontline indices of the Indian stock market climbing to record highs, the railway PSU stocks remained in the negative zone. In one month, most railway stocks have delivered zero returns to their respective shareholders. IRCTC share price shed around 5.50 per cent in one month, IRFC share price lost 8 per cent in one month, RVNL share price finished marginally higher in one month, while IRCON share price corrected around 10 per cent in this period. Railtel's share price lost 2 per cent in one month.

According to stock market experts, these PSU stocks failed to attract investors due to the policy paralysis caused by the Lok Sabha elections 2024 in the first quarter of FY25. The high base effect during Q1FY25 was also a reason for weak Q1 results in FY25 by these railway stocks. However, after the inception of a new government, PSU companies are expected to pick up momentum, and the recent cabinet decisions regarding new railway line projects, etc., are glaring examples of it. They said railway stocks are available at a discounted price, and one can look at IRFC and RVNL shares during bottom fishing.

Triggers for railway stocks

On why railway stocks failed to participate in the Indian stock market rally, Dr Ravi Singh, SVP - Retail Research at Religare Broking, said, “Railways, another sector that has multi-baggers like IRCTC, IRFC and RVNL, have returned nothing over the past month. But this consolidation could be an attractive opportunity to go bottom fishing. Investors may look to accumulate companies with strong financials and a healthy order book, which are likely beneficiaries of India's infrastructure push and modernization plans.”

"Current volatility may want short-term traders to take caution and place strict stop losses, effectively hedging away from that risk. Although its performance over the short-term has been flat, this stock still looks very attractive from a long-term perspective due to solid government initiatives and an improving demand for efficient rail services," said Ravi Singh.

Speaking on these railway PSU stocks available at a discounted price in the current bull market, Seema Srivastava, Senior Equity Research Analyst at SMC Global Securities, said, “Railways stocks are good for long-term investment because the government's continued focus on infrastructure development, including railways, would support the growth prospects of these companies. Moreover, favourable policy initiatives to modernise and upgrade rail networks, stable revenue streams, and strong order books will likely get good financial support from these companies.”

On the outlook of IRCTC, IRFC, and RVNL shares, Seema Srivastava gave the following stock-wise explanation:

IRCTC: According to the company's management, expansion plans into new business verticals, strategic partnerships, and collaborations will contribute to its growth trajectory. The company expects to diversify its revenue streams, tap into emerging areas, and explore innovative business models to unlock new opportunities and improve its operating performance in the coming quarters.

IRFC: The company strategically supports railways' capex funding for infrastructure projects and plans to lay about 40,000 kilometres of new track over the next six to eight years.

RVNL: Rail Vikas Nigam is in the business of executing all types of railway projects, including new lines, doubling, gauge conversion, railway electrification, metro projects, workshops, major bridges, construction of cable-stayed bridges, institution buildings, etc., on the development front, recently, RVNL has signed an MoU with Dhaya Maju Infrastructure (Asia) Sdn Berhad (DMIA). They may collaborate to work jointly on railway infrastructure and services projects in the ASEAN market and other regions

Stocks to buy on Monday

Regarding railway shares to buy on Monday, Shiju Vasu Koothupalakkal, Senior Manager of Technical Research at Prabhudas Lilladher, said, “Among the railway stocks RVNL, IRFC and IRCTC, RVNL share looks better placed technically, with a higher low formation visible on the daily chart taking support near ₹514 level just maintaining above the significant 50EMA zone and indicating a decent pullback, has improved the bias. The stock has shown strength with a positive candle formation and tremendous volume participation.”

"We anticipate carrying on with the positive move in the coming days. The next visible target is ₹647, and thereafter, with strength sustaining, we can achieve the next ₹690 level further ahead. The major support zone from the current rate would be the important level of 50EMA at ₹535 zone," the Prabhudas Lilladher expert concluded.

Disclaimer: The views and recommendations above are those of individual analysts or broking companies, not Mint. We advise investors to check with certified experts before making any investment decisions."