Popular railway stocks to buy in India
Government backing, consistent progress, and technological advancements make railway related stocks an attractive investment opportunity. If you are planning to buy common stocks in this sector to diversify your portfolio, take a look at this railway stock list featuring companies currently trending in investor circles.
1. RITES
Founded in 1976, RITES is a government-run engineering organisation and consultancy specialising in transport infrastructure, including railway ventures. Besides end-to-end processes, it also deals with railway rolling stock, wet leasing of locomotives, and quality assurance. The company also caters to an international clientele based in countries like Indonesia, Malaysia, and Thailand. Additionally, RITES has expanded its business in sectors like inland waterways, green mobility, ropeways, urban engineering, and air travel.
2. IRCTC
Headlining the ticketing and tourism sector of Indian Railways, Indian Railway Catering and Tourism (IRCTC) offers various services to train travellers. Apart from monopolising the online railway ticket booking system, this 25-year-old company also sells bottled drinking water at stations and on trains. Moreover, it offers a host of other useful hospitality services like on-the-go catering, executive lounges, retiring rooms, and dormitories.
3. Railtel Corp
An information and communication infrastructure firm, Railtel maintains a nationwide optic fibre network with an exclusive right of way along Indian railway corridors. Established to revamp the telecommunications system of railways, this government-owned company has played an integral part in manifesting the digital ambitions of the country in train-led journeys which has augmented its growth potential in the capital market.
4. Titagarh Wagons
Involved in the sale of wagons, coaches, train electricals, metro trains, and steel casting, Titagarh Wagons serves national as well as foreign clients. This company offers one of the most sought-after railways stocks in India and could make for a fitting addition to your portfolio if you are keen to invest in the private railway sector stocks.
5. CONCOR
A venture helmed by the Indian Ministry of Railways, Container Corporation of India (CONCOR) has two primary segments—EXIM and Domestic, which are engaged in turnkey logistics services, including the transfer of containers along with its storage and management. Besides rail projects, the company also oversees the handling of air cargo complexes, ports, and cold chains.
6. BEML
Earning approximately half of its revenue from the production of construction and mining machinery, BEML is also known to manufacture coaches, wagons, and locomotives for railways and metros. Moreover, it supplies equipment to the aerospace and defence entities of India.
7. Indian Railway Finance Corp Ltd.
Indian Railway Finance Corp Ltd., also known as IRFC, is the financial arm of the Indian Railways, incorporated in 1986. It manages finances and provides financial support to the Indian railways. IRFC's main business activity is leasing, which helps it fund the Indian railways. The company borrows funds from the Indian finance markets and invests in creating or acquiring various assets, which it then leases to the Indian railways for further use. Since it works closely with the government, its financial health is closely tied to the Indian Railways’ needs and stability.
8. Rail Vikas Nigam Ltd.
Rail Vikas Nigam Ltd., also known as RVNL, is a company that develops rail infrastructure in India, such as new rail bridges, lines, production units, workshops, and the electrification of railways and included infrastructure. As a key player in railway infrastructure, RVNL supports the modernisation and expansion of the railway network. It helps the Indian Railways enhance its services and operational capabilities. The company receives funding from the government and serves numerous PSUs as clients.
9. Ircon International Ltd.
Ircon International Ltd. is a construction and engineering company that was incorporated by the Ministry of Railways in 1976. The company works to develop infrastructure for railways and road ministry such as tunnels, metros, bridges, highways, railway electrification, etc. The company has completed over 120 international projects and 390 domestic projects in more than 25 countries, including Sri Lanka, Bangladesh, Nepal, Malaysia, etc.
10. Ramkrishna Forgings Ltd
Ramkrishna Forgings Ltd. was incorporated in 1981 and is primarily engaged in the manufacture of forgings. The company is headquartered in Kolkata, West Bengal, and delivers forged, fabricated, and machined products to a host of sectors and companies. The sectors served by Ramkrishna Forgings Ltd. include railways, earth-moving, automobile, farm equipment, oil and gas, power, etc. The company continually invests in technology and production processes to enhance efficiency and meet the growing demands of its diverse clientele.
11. Jupiter Wagons Ltd
Jupiter Wagons Ltd, previously called Commercial Engineers & Body Builders Company Limited, is a leading manufacturer of passenger coaches, railway wagons, castings, and wagon components in India, primarily for the Indian railways. The company has a strong presence in the railway industry, contributing to the development and modernisation of railway infrastructure. It is involved in both the production and maintenance of railway vehicles. The company has recently expanded to other countries outside India to improve its finances and earn more revenue.
Features of Indian railways share
Indian Railways shares exhibit several noteworthy features that highlight the importance and vastness of this network. These features include:
1. Extensive network
Indian Railways boasts the fourth largest railway network globally, covering over 68,000 kilometres. This extensive network underscores its critical role in connecting various parts of the country.
2. Passenger-centric
As the world’s largest passenger carrier, Indian Railways transports millions of passengers daily, reflecting its central role in everyday transportation for countless individuals across India.
3. Freight powerhouse
Indian Railways is a pivotal player in goods transportation, significantly contributing to the nation’s economic development by efficiently moving a wide range of commodities.
4. Diverse services
The railway system offers a broad spectrum of services beyond just passenger and freight transportation. These include catering, tourism, parcel services, and various types of trains, catering to different needs and preferences.
5. Modernising and expanding
Indian Railways is continually investing in technology and infrastructure development. This focus on modernisation and expansion aims to enhance efficiency, safety, and overall service quality, ensuring that it meets contemporary demands and future challenges.
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What are rail stocks?
Rail stocks, or railway stocks, are shares of companies that operate within the Indian railways sector. The sector is majorly owned and managed by the Indian government, and companies other than PSUs provide products and services that support the Indian railways. Most railway companies are engaged in manufacturing railway wagons, building railway structures such as tunnels and bridges, or providing financial support to Indian railways.
Features of Railway Shares
Here are the features of rail stocks in India:
- Government influence: The government heavily influences the railway sector in India. Government policies, subsidies, and investment plans significantly impact rail stocks.
- PSUs: Many major railway companies are public sector undertakings (PSUs), such as IRFC and RVNL, which can provide stability to their stock prices as they experience less volatility than other private companies.
- Sensitivity: Rail stocks can be sensitive to economic cycles. A negative Economic condition can lead to reduced demand for freight and passenger services, impacting revenues and profits.
- Private sector inclusion: The Indian government has opened the possibility of including the private sector in the operations of the railways. Opportunities for private sector investment in railway projects and services offer growth potential for their stocks.
- Regulations: Rail stocks are heavily influenced by government policies related to ticket fares, subsidies, incentives, new infrastructure, budget allocation, and management. If these factors are negative, rail stocks may fall in price.
Critical aspects to be mindful of when investing in railway-related stocks
Investing in railway stocks is an enticing prospect due to the steadfast nature of the industry and government participation. While several rewards underscore these stocks, there are some considerations and inherent risks that you should consider before pledging money.
1. Government regulation
Indian Railways is a state-owned body that will always be impacted by government-prescribed policies and regulations. While exploring stock or stock options in railway companies, research extensively on the latest updates announced by the state authorities particularly related to infrastructure, privatisation, and budget allocations.
2. Financial performance
Before you jump on the railway stock bandwagon, assess the fiscal details of the companies. Check for key factors like profitability, accumulated debts, and revenue to understand and predict its growth trajectory for the future.
3. Technology
Modernisation of railways solely relies on how well companies adapt and implement technological advancements in their projects. Gauge how the company is interspersing automation, digitalisation and electrification to improve safety, efficacy, and affordability in their long-term product or service offerings.
4. Risks
Other than regulatory restrictions, the railway domain is susceptible to geopolitical and operational risks. So before you commit to a company, ensure that you carry out a thorough assessment that catches any fiscal threats and gives you a realistic perception of your capacity to endure risky investments.
5. Demand
The primary driver behind the revenue of Indian Railways is the passenger and freight traffic. So, you should double-check the demand for the amenities provided by the company in question by closely looking at industrial activities, population spurt, and trade volumes.
Should you invest in railway stocks?
Investing in railway stocks in India presents a promising opportunity due to several compelling reasons. The Indian railway sector is experiencing significant growth, driven by government support, technological advancements, and increasing demand. This sector has become an attractive option for investors looking for stable and long-term investment opportunities.
1. Growing sector
The Indian railway industry is booming, thanks to government initiatives, technological innovations, and rising demand for rail services. This growth trajectory is attracting investors who recognise the sector's potential for substantial returns.
2. Government support
The Indian government has been consistently increasing its budget allocation for railways, which boosts investor confidence. This support is crucial for the sector's expansion and modernisation efforts.
3. Diverse projects
The upcoming financial year 2024-25 includes ambitious projects such as economic railway corridors to optimise logistics for energy, minerals, and cement, improved port connectivity, and upgraded high-traffic corridors. These projects are integral to the PM Gati Shakti plan, indicating robust growth prospects for the sector.
4. Passenger expectation
Plans to revamp 40,000 train bogies to Vande Bharat standards focus on enhancing passenger safety and comfort. This is likely to increase the demand for railway services, further driving growth.
5. Long-term investment
Railway stocks are viewed as a good long-term investment. The extensive time required for infrastructure development ensures steady growth opportunities, making them suitable for investors looking for stable returns over time.
How to invest in the rail stocks in India?
Investing in rail stocks in India can be approached in various ways to suit different risk appetites and investment strategies.
- Individual stock Purchase: Investors can directly buy shares of individual railway companies. This method requires thorough research to identify the best-performing stocks.
- Mutual funds and ETFs: Investing in mutual funds or exchange-traded funds (ETFs) that focus on railway stocks can provide diversification and professional management. These funds pool investments in multiple rail companies, spreading risk.
- Systematic Investment Plans (SIPs): Regular investments in railway-focused mutual funds or ETFs through SIPs allow investors to benefit from rupee-cost averaging and long-term wealth creation. This method is particularly beneficial for those seeking steady growth and reduced investment risk.
Benefits of investing in rail stocks in India
Investing in railway stocks in India offers numerous advantages, making them a valuable addition to an investor’s portfolio.
1. Diversification
Railway stocks can help diversify an investment portfolio. They are not highly correlated with other asset classes such as stocks and bonds, which can reduce overall portfolio volatility.
2. Long-term investment
The railway industry, while cyclical, has a long history of growth. This makes railway stocks an attractive option for those seeking long-term investments with steady growth potential.
3. Dividends
Many railway companies offer dividends, providing investors with a steady stream of income. The rail sector has a tradition of paying dividends, making these stocks appealing for income-seeking investors.
4. Government support
Railway companies often benefit from government support, such as subsidies for construction and operation, which can lower business costs and enhance profitability.
5. Increasing demand
The demand for railway services is on the rise due to population growth, urbanisation, and economic expansion. This increasing demand is expected to boost revenues, raise share prices, and enhance overall sector growth.
Conclusion
From a strategic viewpoint, investing in small or mid-cap railway-related stocks can be an excellent way to boost your market gains. The lucrative features definitely make such stocks strong contenders. Still, you should not overlook the fact that its performance is drastically shaped by government policymaking along with geopolitical caveats and labour disputes in the country. So, be on the lookout for any red flags and invest according to your fiscal strengths and risk appetite.
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