IRFC, RVNL, IRCON, RITES, RailTel, Titagarh, Jupiter Wagons: Why railway stocks are rallying

Railway stocks are on a roll despite a flat capex of Indian Railways in FY2026BE and modest medium-term growth prospects. Railtel Corporation of India Ltd (RailTel) led the rise with 40 per cent surge in a one month. IRCON International Ltd shares soared 34.91 per cent while those of RITES jumped 31.74 per cent. Titagarh Rail Systems Ltd shares climbed 28.18 per cent, Rail Vikas Nigam Ltd (RVNL) 19.24 per cent, IRFC (16.31 per cent) and Jupiter Wagons (40 per cent) during the same period.

Analysts noted market capitalisation of seven railway stocks stood roughly at Rs 3.6 lakh crore last week against book value of Rs 78,400 crore and net profits of Rs 9,900 crore on FY25 basis. Cash and investments for these seven railway stocks accounted for 25 per cent of the book value at end-FY2025 and other income accounted for 12 per cent of the pre-tax profits of the railway stocks in FY2025. They largely attributed the rally to the recent investor interest in smallcap and midcap (SMID) stocks. 

MOFSL in its capital goods sector Q4 earnings review note said government-oriented sectors such as road and railways saw lower ordering activity in Q1FY25. The brokerage said Texmaco Rail expects approximately 1.5 lakh wagons to be ordered in the next three to four years. With a consolidated production capacity of 15,000 wagons annually, Texmaco is ready to capture its fair share of this demand and contribute to the sector's development, it said.

Titagarh Wagons, it said, mentioned that Indian Railways is expected to procure around 1-1.2 lakh incremental wagons, representing a market opportunity of Rs 35,000-40,000 crore for the company. Jupiter Wagons, it said, sees high demand from private players and expects major tenders from Indian Railways later in FY26,
reinforcing a strong outlook till FY28.

"For FY26, it capex is budgeted at Rs 11.4 lakh crore (14.9 per cent YoY). If the positive trend in capex continues in the coming months, it will be positive for the sector particularly from the railways and defense sides," it said.

Kotak does not see scope for a meaningful pickup in railway capex in the medium  term for a few reasons. First, Indian Railways may have largely maximized the capacity of its extant railway network with large investments in rolling stock and track over the past 10 years. Also, there is low visibility on new 
projects such as a high-speed railway network on the lines of dedicated freight  corridors or the upcoming Ahmedabad-Mumbai high-speed line. 

"We attribute the rally in the railway stocks to the general excitement and euphoria in SMID stocks, which has resulted in  several narratives across sectors that are dominated by SMID stocks. The  market is clearly not making any distinction across sectors and stocks, as long  as they fit into some prevailing narrative," Kotak said. 

This broking firm said many of the ‘narrative’ stocks are largely owned by retail shareholders, which may partly explain the periodic bouts of extreme volatility in the stocks.