Rail stocks continue to rise, gain up to 13%
A day ahead of the Union rail budget, stocks of companies related to railways surged for the second straight session, gaining up to 13 per cent on hopes that the government may allow foreign direct investment in the railways. On Friday also, these stocks had gained up to 8 per cent.
The first railway budget of the BJP government is expected to be growth oriented and unveil strategies to mobilise alternative sources of funding. But there is also high expectation that the minister will offer bold plans to improve the service that transports 23 million Indians every day. At least, the railways should put out a “road plan” on how to connect with the manufacturing hubs, ports and the proposed “smart cities”.
The budget is also likely to spell out the plan for having a “Diamond Quadrilateral” connecting the metros with high-speed trains.
The development of railway infrastructure like building cold-chain storages near railway lines could be on the anvil: it may be a key tool to fight inflation by reducing the supply-side bottle necks. This will also create more business opportunities for companies associated with the railways.
The new government has already increased railway passenger fares by 14.2 percent and the freight carriage charges by 6.5 percent. However, it will need more funds from international lenders to finance long gestation projects. The Railways is saddled with a huge cash crunch of Rs.26000 crores, largely triggered by a decline in the growth in passenger earnings.
Apart from FDI in railways — the Dalal Street would be watching for the budgetary allocation, the annual plan spending for 2014-15, the borrowing plan, and the new rail projects.
“Some measures which can be expected in this railway budget are FDI in railways, an increase in the number of trains, cleaning up of surrounding areas of railway tracks, introduction of bullet trains, etcetera” said an investment consultant.
In keeping with the Union Budget expectations, the Sensex also crossed 26,000-mark for the first time in its history. Technology stocks, riding on upbeat forecast, spearheaded the surge even as healthcare, FMCG, auto and infra shares joined the rally.