Railway stocks rally in trade; IRFC's market cap crosses Rs 2 lakh crore for first time

Indian Railway Finance Corporation (IRFC) shares registered an all-time high on Friday, taking the company’s market capitalisation past the Rs 2 lakh crore mark for the first time. 

At 12:45 pm, the IRFC stock traded 9.5 per cent higher for the day at Rs 160 apiece on BSE, while the company’s market capitalisation (widely referred to as mcap in market parlance) at Rs 2,09,135.3 crore. 

Earlier in the day, the stock rose by as much as Rs 14.5, or 9.9 per cent, to a record Rs 160.8 apiece on the bourse, taking the company’s market value to an unprecedented Rs 2,10,062.8 crore, according to provisional exchange data. 

Other railway or related stocks also rallied in trade. While Rail Vikas Nigam Ltd (RVNL) shares were enjoying an intraday gain of more than 15 per cent at the last count, the stocks of RailTel, Indian Railway Catering and Tourism Corporation (IRCTC), Texmaco Rail Engineering, Jupiter Wagons, and Oriental Rail Infrastructure were up around 3-6 per cent each. 

What sent IRFC shares soaring? 

"The surge in the Indian Railway Finance Corporation (IRFC) stock can be attributed to several key factors, bolstering its long-term growth prospects. Currently, India is in the midst of an ‘old economy’ run, which underscores the significance of capital expenditure (capex) and sectors sensitive to interest rates," said Anirudh Garg, Partner and Fund Manager at INVAsset, PMS. 

Garg believes that the rally is powered by the government’s plans to launch 3,000 additional Vande Bharat trains over the next five years.  

Also read: Railways to introduce 3,000 new trains in 5 years: Ashwini Vaishnaw 

"This initiative represents a significant expansion and modernization of India's railway network, further driving demand for IRFC's financing services," said Garg. 

The Indian Railways has unveiled a massive 7 trillion rupee investment plan spanning the next decade 

Also read: Rs 7.50 lakh crore Capital Expenditure will create 35 lakh employment opportunities: Ashwini Vaishnaw, Minister of Railway

He also said that monumental developments, such as the government’s ambitious plan to invest a staggering Rs 7 trillion in the railways over the next decade, signal a robust and sustained growth trajectory for the sector, benefitting IRFC as a key player in financing railway assets. 

Omkar Kamtekar Research Analyst Bonanza Portfolio attributes the rally to positive budget allocation expectations for the railway and the opening of Ram Mandir in Ayodhya. 

"The Indian government has established a keen focus on improving the railway infrastructure in the country. In the previous budget, the government allocated the highest-ever fund to this sector, resulting in an increase in orders for many railway firms. In this regard, the IRFC is expected to play a pivotal role in financing these orders. Going forward, it is anticipated that the government will continue with a similar policy stance and allocate a higher budget towards the development of the Indian railways," said Bonanza Portfolio's Kamtekar. 

He added the opening of the Ram Mandir is expected to attract a significant number of tourists to Ayodhya, resulting in a considerable increase in footfall. In response, the government has announced special trains to the city, with IRFC being a direct beneficiary of this move. As a result, the company's shares gained substantial traction in the market, marking fresh 52-week highs.

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