Rail-linked Stocks Surge up to 20% on Modi Ef­fect

The Economic Times - - Markets & Finance - BISWA­JIT BARUAH

Shares of com­pa­nies linked to the rail­ways ral­lied up to 20% on Mon­day, as in­vestors be­lieved that the Naren­dra Modi-led govern­ment would try to re­vive the sec­tor as part of its in­fra­struc­ture drive. Mar­ket par­tic­i­pants are bullish on rail­way stocks as Modi has been em­pha­sis­ing the need for im­prov­ing the rail net­work, mak­ing it more con­tem­po­rary, sim­i­lar to the Ja­panese rail­way sys­tem. Kalindee Rail ral­lied 19.9%, Kernex Mi­crosys­tems rose 19.9%, Tex­maco surged 19.3%, BEML jumped 19.3%, while Hind Rec­ti­fiers gained 17.5% at the BSE on Mon­day. The BJP elec­tion man­i­festo said that the govern­ment will in­tro­duce high-speed Bul­let trains, launch the Di­a­mond Quadri­lat­eral project for high-speed train net­work, build 100 new mod­ern cities, and ex­pe­dite freight and in­dus­trial cor­ri­dors to im­prove the coun­try’s in­fra­struc­ture and cre­ate jobs. Ac­cord­ing to re­ports, the rail­way cor­ri­dors Mum­bai-Ahmed­abad and New Delhi-Patna are on the pri­or­ity list for the new govern­ment. “In­vest­ment in rail­way in­fra­struc­ture is an eco­nomic im­per­a­tive; even a small in­crease in in­cre­men­tal capex will re­sult in sig­nif­i­cant ben­e­fits,” said Satish Ku­mar, an­a­lyst at Stan­dard Char­tered Se­cu­ri­ties, in a note to its clients. “Our in-depth study and on-the-ground checks of the com­monly ig­nored rail­way sec­tor re­veal a .` 5 lakh-crore op­por­tu­nity for com­pa­nies,” Ku­mar added.

BJP and its al­lies en­joy a ma­jor­ity of 335 in the 543-mem­ber house, and Modi is un­likely to face much re­sis­tance in push­ing re­forms.

Rail­way stocks are still about 70% be­low their life-time highs of late 2007 -- the peak of the pre­vi­ous bull run. How­ever, in­vestors stayed away from these stocks as the gov­ern- ment did not make any ma­jor an­nounce­ments in the last few years. “The rail­way com­pa­nies have not re­ceived any ma­jor or­ders for the last cou­ple of years, and I hope this will change,” said Sunil Jain, head of eq­uity re­search at Nir­mal Bang. The Depart­ment of In­dus­trial Pol­icy and Pro­mo­tion has been push­ing for FDI in rail­ways since Au­gust last, and this is also seen as big trig­ger for these com­pa­nies. DIPP is in favour of 100% FDI in rail­way trans­port like el­e­vated rail cor­ri­dor projects, freight ter­mi­nals, sub­ur­ban cor­ri­dors and ded­i­cated freight lines.

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