IRFC, RVNL, RailTel... railway stocks fall on profit booking. Opportunity to buy?

After a strong rally in recent sessions, most railway stocks saw profit booking during intraday trade on the NSE on Tuesday, May 20, slipping 1–5 per cent.

Shares of Titagarh Rail Systems and RailTel declined over 5 per cent each on the NSE, while those of Ircon International fell nearly 5 per cent. Shares of BEML dropped over 4 per cent, while RVNL and IRFC share price declined 4 per cent and 3 per cent, respectively. Texmaco Rail & Engineering (down 3 per cent), Concor (down 2 per cent) and IRCTC (down 1 per cent) also traded lower.

Railway stocks have seen solid gains in the recent past. With stocks witnessing profit booking, investors face classic questions- is it an opportunity to buy railway stocks?

As tensions between India and Pakistan escalated, defence stocks returned to investors' radar. This shift also fueled interest in domestic-centric themes like railways and PSUs, which subsequently began to rally.

Many retail investors seem to have lapped up the stocks of these segments anticipating the similar gains seen from May 2023 to July 2024.

"After a strong upward move in the defence sector, railway stocks have started attracting buying interest over the past week. The entire railway segment has witnessed breakouts from triangle patterns and key resistance levels, accompanied by rising volumes — a clear indication of renewed investor interest in the sector," said Kunal Kamble, Senior Technical Research Analyst at Bonanza.

"There appears to be a sectoral shift in capital allocation toward defence, transport and logistics, capital market, CPSE, realty and railways. Following the defence rally, railways have now emerged as the next beneficiary of this momentum," Kamble said.

Railway stocks: Should you buy?

After falling up to 50 per cent from their peaks, railway stocks have come back to focus due to sector rotations amid expectations of increased government focus and orders.

"The neglected railway sector is now making a compelling case for investor attention. Following the dramatic correction in the second half of 2024, when stocks plummeted by 30–50 per cent, the tide has now turned. In May 2025, railway stocks have not only recovered but have accelerated, with several stocks surging up to 30 per cent," Trivesh D, COO of Tradejini, observed.

Fresh government contracts are coming in and with strategic capex announcements, renewed order flows from Indian Railways, the outlook for companies in the sector has turned bright.

"The rhythm is back, and this time, the trend looks more structural than speculative. The decision by Indian Railways to go back to placing orders has excited investors and delivered an influx of related stocks," said Trivesh.

"While the sector may not be front-of-mind right now, the steady uptrend and recent movement suggest it should appear as an essential part of a materially diversified investment strategy," Trivesh said.

Railway stocks to buy

Kamble is positive about IRFC and IRCON.

"IRFC is exhibiting strong momentum, and further upside is likely above the ₹144 level. A breakout above this mark could lead to a fresh leg of the rally," Kamble said.

"IRCON has broken out of a rectangle consolidation pattern and is trading higher. A potential throwback towards the breakout level of ₹170 could offer a buying opportunity on dips," said Kamble.

Prashanth Tapse, Senior Vice President (Research) at Mehta Equities, is optimistic about IRFC and RVNL over the next one to two years.

"IRTC's margins are expected to remain intact going forward. RVNL will do well because of increased government spending. Almost 30-40 per cent of railway projects come under the RVNL business model," said Tapse.

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Disclaimer: This story is for educational purposes only. 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, as market conditions can change rapidly, and circumstances may vary.