Railway Stocks Under Pressure :IRFC, NTPC, IFCI Drop Following Profit Booking

Railway Stocks Under Pressure in which IRFC, NTPC, IFCI Drop last week gradually , we will discuss why railway stocks under pressure and what is key factors which causes it –

The share prices of key railway-related companies such as IRCTC, NTPC, and IFCI saw a decline last week due to a combination of factors affecting the broader market and industry specifics.

• IRCTC (Indian Railway Catering and Tourism Corporation): The stock has faced a decline of about 7% over the past month, largely due to overall market volatility and concerns about high valuations. Despite reporting solid growth in revenues and profits in the past financial year (21% revenue growth and 10% rise in profit), recent market corrections affected IRCTC’s stock. Additionally, the broader market corrections on the back of geopolitical tensions and inflation concerns weighed on IRCTC’s performance. As of October 4, 2024, IRCTC’s share price was around ₹872.75, down from its 52-week high of ₹1,138.90.
• NTPC (National Thermal Power Corporation): NTPC’s stock also faced some downward pressure due to broader market volatility. Energy stocks, including NTPC, are often impacted by fluctuations in global energy prices and policy developments. In recent sessions, NTPC’s stock, which reached around ₹424.15 in late September, reflected market concerns about rising interest rates globally and their potential impact on large capital-intensive businesses like NTPC​.
• IFCI (Industrial Finance Corporation of India): Like other PSU (Public Sector Undertaking) stocks, IFCI’s shares also saw a decline, which can be attributed to market sentiments around the Indian government’s policies towards PSU investments. Any underwhelming announcements regarding capital expenditure or future growth prospects can negatively impact stock prices. IFCI’s stock has been subject to volatility amid uncertainties in the financial sector and expectations around government support.

In general, the decline in these railway and energy sector stocks can be attributed to broader market corrections, geopolitical issues, and sector-specific factors like investment policies and infrastructure budgets.

Railway Stocks Under Pressure Key Factors :

The recent decline in railway stock prices can be attributed to a few significant factors that impacted the market last week –

1. Profit Booking Following Strong Performance

One of the major reasons for the fall in railway stocks was profit booking. Over the past year, railway stocks experienced a massive surge in value. For example, shares of Indian Railway Finance Corporation (IRFC) rose by over 422%, Rail Vikas Nigam Ltd (RVNL) increased by around 295%, and other major players like IRCON International and RailTel Corporation saw jumps of 284% and 243% respectively. . After such a significant rise, investors started booking profits, causing a pullback in stock prices.

2. Lack of Major Announcements in Interim Budget 2024

Another key factor that led to the decline in railway stocks was the lack of significant announcements in the Interim Budget 2024 for the railway sector. Despite the government allocating ₹2.4 lakh crore to the railways earlier this year, the market expected more impactful measures to be revealed during the budget presentation. The absence of major, market-moving reforms or initiatives for the railway sector led to a dip in sentiment among investors, further driving stock prices down. Stocks like IRFC, IRCON, RVNL, and RailTel all saw declines ranging from 2-3%.

3. Concerns About Future Growth

Investors were also concerned about the railway sector’s future growth prospects. Although the government has plans to extend metro rail projects and upgrade bogies to Vande Bharat standards, some market participants felt that these measures did not live up to their expectations for transformative changes. This uncertainty around future expansion and returns made investors cautious, leading to selling pressure on railway-related stocks.

4. Global Economic Trends

In addition to local factors, global market conditions also impacted the railway sector. Broader economic trends, such as fluctuations in energy prices, inflation, and general global market volatility, may have influenced investor behavior. For instance, in China, after a significant rally in various sectors, stocks began to cool down as investors became wary of overextended valuations and uncertain economic recovery measures. A similar sentiment could have played a role in India’s railway stocks, as investors shifted their focus away from sectors perceived as having already peaked.

5. Performance of Individual Stocks

While most railway stocks saw declines, BEML was an exception. BEML’s share price bucked the trend by touching a 52-week high, driven by continued positive sentiment and strong technical support. Analysts suggested that despite the downturn in other railway stocks, BEML’s strong performance was sustained by favorable market conditions and company-specific factors, such as solid project pipelines and ongoing growth prospects.

In summary, the fall in railway stock prices last week was primarily driven by profit booking following an extended period of rapid growth, coupled with the disappointment over the lack of significant announcements in the Interim Budget 2024. Concerns over the railway sector’s future growth and global market conditions also played a role in the downward trend​.