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Government’s Budget Focus on Railways and Potential Stocks to Watch

18 July 20244 mins read by Angel One
Examine the government's budgetary focus on the railway sector, along with key stocks investors should monitor for potential opportunities.
Government’s Budget Focus on Railways and Potential Stocks to Watch
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Industry Seeks Continued Investment in Infrastructure

The Indian railway industry has urged the government to maintain its focus on capital expenditure (capex) in the upcoming budget on July 23rd. Industry believes continued investment is crucial for growth. Key personnels of Rail sector companies emphasised the importance of prioritising the creation of dedicated economic corridors announced in the interim budget. These corridors, focusing on energy, minerals, and cement, are expected to improve connectivity and boost economic activity across the country along with increased capex spending on technological advancements. They believe investments in rail-road connectivity, Internet of Things (IoT), automation, blockchain, cloud computing, Artificial Intelligence (AI), and robotics will improve logistics efficiency.

Safety Concerns Remain a Top Priority

While the industry seeks continued growth, the recent Kanchanjunga Express crash in June has reignited safety concerns. Government should prioritise safety measures in the upcoming budget.

Production-Linked Incentive (PLI) Scheme: A Potential Boost

Implementation of a production-linked incentive (PLI) scheme may boost domestic production of railway ancillary parts. This scheme would incentivise businesses to manufacture these parts in India, reducing reliance on imports and promoting export-led growth. PLI scheme could create a more entrepreneur-friendly ecosystem for the railway components sector, while also attracting foreign investment.

Balancing Growth and Safety

The upcoming Indian Railways budget will need to strike a delicate balance between the industry’s demands for continued growth and infrastructure development, and the pressing need to address safety concerns. The government will need to carefully consider these contrasting priorities when allocating funds in the upcoming budget.

Railway Stocks to Watch

Investors seeking to capitalize on the government’s focus on the railway sector should keep the following stocks related to railway infrastructure and ancillary services in watchlist. Key companies include:

Titagarh Wagons Ltd, a prominent player in India’s railway rolling stock industry, manufacturing freight wagons and passenger coaches

Texmaco Rail & Engineering Ltd is another significant entity involved in producing railway freight cars and other critical components.

Gateway Distriparks Ltd operates in logistics and transportation, offering integrated rail terminal services and container freight stations, crucial for efficient rail logistics.

Hind Rectifiers Ltd contributes with power semiconductor devices crucial for railway electrification projects.

L&T Construction Ltd engages in railway construction, electrification, and signaling, leveraging its engineering expertise.

Bharat Heavy Electricals Ltd manufactures traction motors and transformers vital for railway electrification and modernization.

Other Notable mentions are BEML Ltd, Siemens Ltd and ABB India Ltd, RVNL, IRFC Ltd, Ircon Ltd.

These companies play integral roles in various aspects of India’s railway sector, from infrastructure development to technology integration, poised to benefit from government initiatives aimed at enhancing rail connectivity and efficiency. Investors should keep these stocks in watchlist

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. The information is based on various secondary sources on the internet and is subject to change. Please consult with a financial expert before making investment decisions.

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