The railway budget precedes the union budget every year. Indian Railways has a humungous size of operations in India and hence has the distinction of having a special parliamentary session for the railway budget. Normally, many people trade on companies that have linkage to the capital expenditure (capex) by the railways, like wagon manufacturers, spare part companies, and railway construction, signaling system and other railway equipment suppliers. These stocks normally give a decent trading gain during the run-up to the railway budget in anticipation of a higher allocation for capex by the railways. The hope to garner orders results in the firming up of share prices of the railway capex-linked stocks like Kernex Microsystems, Texmaco, Titagragh Wagons, Kalindee Rail Nirman (Engineers), Tantia Constructions and Gabriel India among others.
But surprisingly, the uptrend seen usually in these stocks is missing this year. Perhaps the market has become savvy and realised that these companies do not benefit much and it is business as usual post-budget. Or perhaps the rally could be delayed this time around. However, I have never subscribed to this idea of playing on the railway stocks for trading gain before the railway budget. That’s because it is extremely difficult to time the entry and exit into these stocks. Buying into them actually turns out to be a trap for many traders who end up holding on to loss-making positions.
However, there is a good trading opportunity in certain category of stocks this year. The railway minister could announce some clear steps towards the implementation of the dedicated freight corridor (DFC) this year. The Japanese government has already sanctioned the funds for the proposed project. The government is also under immense pressure to revive capital investment to boost the sagging economy and there could not be any other better way to do it than by rolling out the multi-billion dollar ($5-6 billion) project. The DFC would be covering 2,700km along two routes: the eastern corridor from Ludhiana (Punjab) to Dankuni (West Bengal); and the western corridor JNPT (near Mumbai) to Tughlakabad (near Delhi).
A roadmap for the implementation of such a large project would be good news for the engineering, procurement and construction companies that have been struggling to get new orders in the past couple of years. Companies like Larsen and Toubro, Gammon India and IVRCL stand to benefit from it. Another unexpected beneficiary would be the logistic companies, which could be good bets for trading gains from the railway budget this year. Many of these companies have invested heavily to build private railway freight business in the past three years since privatisation in 2007. Logistic companies also have or are building warehouses and container depots along the freight corridor that would get monetised as India’s dream to set up DFC turns into reality.
....more info
But surprisingly, the uptrend seen usually in these stocks is missing this year. Perhaps the market has become savvy and realised that these companies do not benefit much and it is business as usual post-budget. Or perhaps the rally could be delayed this time around. However, I have never subscribed to this idea of playing on the railway stocks for trading gain before the railway budget. That’s because it is extremely difficult to time the entry and exit into these stocks. Buying into them actually turns out to be a trap for many traders who end up holding on to loss-making positions.
However, there is a good trading opportunity in certain category of stocks this year. The railway minister could announce some clear steps towards the implementation of the dedicated freight corridor (DFC) this year. The Japanese government has already sanctioned the funds for the proposed project. The government is also under immense pressure to revive capital investment to boost the sagging economy and there could not be any other better way to do it than by rolling out the multi-billion dollar ($5-6 billion) project. The DFC would be covering 2,700km along two routes: the eastern corridor from Ludhiana (Punjab) to Dankuni (West Bengal); and the western corridor JNPT (near Mumbai) to Tughlakabad (near Delhi).
A roadmap for the implementation of such a large project would be good news for the engineering, procurement and construction companies that have been struggling to get new orders in the past couple of years. Companies like Larsen and Toubro, Gammon India and IVRCL stand to benefit from it. Another unexpected beneficiary would be the logistic companies, which could be good bets for trading gains from the railway budget this year. Many of these companies have invested heavily to build private railway freight business in the past three years since privatisation in 2007. Logistic companies also have or are building warehouses and container depots along the freight corridor that would get monetised as India’s dream to set up DFC turns into reality.
....more info