Shares of Indian railway companies have staged a powerful comeback, surging as much as 13% in the past two weeks, as investors bet on the sector ahead of the Union Budget 2026. This rally marks a significant shift from the subdued performance witnessed last year.
What's Fueling the Railway Stock Rally?
The recent upswing is attributed to two major catalysts. The first is the passenger fare hike effective from December 26, which is projected to add approximately ₹600 crore in annual revenue for the Indian Railways. The second, and perhaps more significant driver, is the pre-Budget optimism surrounding capital expenditure. Analysts anticipate the government to allocate a record ₹1.3 trillion (₹1.3 lakh crore) for railway infrastructure in the upcoming budget.
Vinit Bolinjkar, Head of Research at Ventura Securities, confirmed these factors as the key drivers. Data from Capitaline shows that in the last 10 trading sessions, IRCON International led the pack with a sharp 14% jump. This was followed by a 10% rise in Rail Vikas Nigam (RVNL). Other major players like IRFC, Titagarh Rail Systems, and Jupiter Wagons each gained around 9%. IRCTC, however, offered a more modest return of about 2%.
Railways: From Public Utility to Growth Pillar
Experts note that the railways have undergone a fundamental transformation. "Over the past few years, railways have transitioned from being just a means of public utility to a key pillar of India’s capital expenditure cycle," observed Bolinjkar. This shift is backed by sustained policy support, improved project execution, and better financial discipline.
Ashwini Shami, President and Chief Portfolio Manager at OmniScience Capital, highlighted the sector's strategic importance. "As railways play a crucial role in eliminating supply chain bottlenecks and fostering a robust manufacturing and export ecosystem," he expects the sector to continue receiving substantial budget allocations for capital investments.
Public Sector Undertakings (PSUs) like RVNL and IRFC have also benefited from improved operating ratios and a heightened focus on safety infrastructure, including the indigenous anti-collision system 'Kavach'. Bolinjkar further pencilled in that the government may double safety spending in 2026 alongside the massive ₹1.3 lakh crore allocation to maintain growth momentum.
Should You Invest? Analysts Advocate Selectivity and Patience
While the momentum is strong, analysts unanimously advise caution and a selective approach rather than a broad-based investment. The Nifty Railways PSU index currently trades at a price-to-earnings multiple of 26, presenting a mix of undervalued and overvalued opportunities.
"Hence a bottom-up approach is important to select companies with a good execution track record and favourable valuations," highlighted Ashwini Shami. Harshal Dasani, Business Head at INVAsset PMS, echoed this, stating that railway stocks should be viewed more as a selective opportunity. "Valuations across several names already factor in optimistic assumptions, making stock selection critical as purely sentiment-driven rallies may struggle to sustain," he added.
Looking ahead, the government's focus is expected to remain on expanding new routes, reducing congestion, producing advanced trains and wagons, and improving the safety and efficiency of services. Companies involved in construction, engineering, component manufacturing, and logistics are poised to see strong order book and earnings growth.
Top Railway Stock Picks from Analysts
Analysts have named their top recommendations based on both fundamental and technical analysis:
Fundamental Picks by Vinit Bolinjkar (Ventura):
- RVNL: Top pick with a robust ₹80,000 crore order book and infrastructure focus. Target: ~₹450+ (1-year).
- IRFC: Offers stable leasing income and dividends with government backing; seen as low-risk for 15-20% upside.
- IRCON International: Strong EPC capabilities, gained 19%; considered undervalued compared to peers.
- IRCTC: Holds a monopoly in railway ticketing and catering; digital growth remains steady.
- Titagarh Rail Systems: Leading wagon and coach maker benefiting from private sector agility.
Technical Picks by Kunal Kamble (Bonanza):
RITES: Trading near ₹245 and consolidating. Price is holding above a key support zone of ₹238–240. A breakout above ₹255 could trigger an upside towards ₹265–270.
IRCTC: Currently trading near ₹690 after a correction, forming a base around ₹660–680. A conditional buy above ₹710 is advised for a potential move towards ₹760–800 in the medium term.
Disclaimer: This story is for educational purposes only. The views and recommendations expressed are those of individual analysts or broking firms. Investors are advised to consult certified experts before making any investment decisions.
