By Veer Sharma

Copyright indiatimes

ETMarkets.comRailway stocks have surged recently due to order wins and positive market sentiment, sparking debate about a potential structural turnaround.

After being stuck in the slow lane for more than a year, railway stocks have suddenly raced ahead, delivering up to 16% gains in the past month. The sharp rebound, albeit due to a series of order wins and upbeat market mood, has reignited debate on whether this marks the beginning of a structural turnaround or just another short-lived bounce.“The recent rally in railway stocks appears to be more of a short-term bounce, largely driven by their earlier underperformance. While sentiment has improved temporarily, the move seems more technical in nature rather than a reflection of any significant fundamental change. Sustained upside would likely depend on the pace of execution and fresh order inflows,” Rajesh Palviya of Axis Securities, told ETMarkets.Caution lingers, says Aishvarya Dadheech, Founder and CIO of Fident Asset Management. “Yes, the Rs 77,000 crore capex announcement is encouraging, but in reality, railways have already stretched the capacity of their existing network. Unless we see genuine visibility on new large-scale projects, it’s hard to call this a sustained rally just yet.”Valuations, too, remain elevated, Dadheech told ETMarkets. Even after corrections, railway PSUs continue to trade at a premium. Palviya echoed the same, suggesting that Q1FY26 was muted for most railway stocks, primarily due to execution delays that weighed on their performance. “However, order books remain strong, providing medium-term revenue visibility, but the near-term upside looks limited given the slower pace of execution and the fact that much of the sector’s growth prospects are already factored into prices,”he added. Another uncertainty is the direction of government spending. “Government spending will definitely continue, but whether railways see the bulk of that or whether it tilts more towards roads, ports, or urban infra is tougher to predict. The capex envelope will remain large — the question is just about where the incremental rupee gets allocated,” Dadheech added. Live EventsMarket watchers also argue that much of the visible order book is already priced in. “For a real positive surprise, you’d need to see either fresh mega projects being announced or execution picking up faster than expected. Right now, neither seems fully visible in the medium term,” Dadheech added, pointing to execution delays as a key risk to earnings momentum.Orders Wins Boost Near-term MomentumFrom a short term perspective, much of the optimism stems from a series order wins across major names in the sector. For instance, Railtel received the Letter of Acceptance (LoA) from the State Project Director of the Bihar Education Project Council. The order is valued at Rs 210 crore. Last week, the company had also confirmed the receipt of multiple other orders, which were close to Rs 1,000 crore in value.RVNL also emerged as the lowest bidder for a project from West Central Railway last week that was valued at Rs 169 crore. The execution timeline for this project is 540 days.Among the non-PSU railway stocks, Jupiter Wagons received the Letter of Acceptance (LoA) from the Ministry of Railways, which pertains to the supply of 9,000 LHB Axles for railway bogies. This order is valued at close to Rs 113 crore.Stock PerformanceTo put things into perspective, Titagarh Rail Systems’ stock price has risen nearly 14% in the last 1 month. However, after blistering gains of 517% in the last three years, the stock is down 30% on a year-to-date basis. Private player Jupiter Wagons, up 7% in a month, is down nearly 40% in one year. The stock’s 3-year returns are 367%, data showed. RVNL (up 11% in a month), is down 35% in 1 year. However, the stock has risen a staggering 950% in 3 years. Texmaco, Railtel, and Ramkrishna Forgings have risen up to 280% in the last 3 years. They have spurted up to 13% in the last 1 month.While recent gains suggest renewed buying interest, the deep cuts over the past year highlight the risks from stretched valuations and execution delays, making the sector one that investors approach with both optimism and caution. The next big trigger is the Union Budget, although still a couple of months away. It remains to be seen if the government’s capex will have some space for Railways, a sector that the Budget has missed touching upon in the last 1-2 years.(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of the Economic Times)Add as a Reliable and Trusted News Source Add Now!
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