Rate, speed thrill rail users but high-fliers hit ground

Tags: Companies

Metals, FMCG stocks go up but IR contractors fall

The railway budget had a mixed impact on stocks related to the rail sector. The budget’s strong focus on infrastructure by raising the rail electrification outlay, speeding up passenger and freight movements, expanding the freight basket and building terminal capacities, along with the status quo on freight rates left their imprint on the stock prices of specific stocks.

No hike in the freight rate proved positive, particularly for metals and mining stocks, along with fast moving consumer goods and healthcare stocks.

Stocks of companies that receive business from the Indian Railways saw sharp movements, as the rail budget proposals were laid out in Parliament. These stocks had a mixed close based on the expectations already built in the stocks and the actual budget proposals.

“Investments of Rs1.21 lakh crore were focussed on expanding the existing capacity of the network and improving safety and passenger amenities", Kotak Mahindra Bank said in a note on the railway budget. "We note that budget allocation on doubling and road safety has increased by 179 per cent and 305 per cent, respectively.”

The stocks of Container Corporation of India (2.98 per cent), KEC International (2.86 per cent), Zicom (5.39 per cent) and IVRCL (4.84 per cent) made gains as many proposals were seen as positive for them. The proposal to raise the electrification plans by 50 per cent and the target to electrify 2,000 km boosted the stocks of heavy electrical equipment maker KEC International. Similarly, better port connectivity and no increase in freight rates boosted the stocks of Container Corporation of India.

Soumyajit Niyogi, associate director, India Ratings & Research, said, "The targeted increase in commissioning of broad gauge lines by over 60 per cent and electrification by 25 per cent are likely to improve order flow and execution for companies such as KEC International and Simplex."

"The announcement of the three new freight corridors will lead to higher orders for companies such as L&T and Tata Projects, while the two proposed elevated suburban corridors in Mumbai will mean higher order inflow for companies such as ITD Cementation, J Kumar Infraprojects and L&T," Niyogi said.

There were disappointments for companies on which expectations had been riding high and their stocks fell sharply, like in the case of Texmaco Infrastructure and Holdings (-5.32 per cent), Kalindee Rail (-9.26 per cent), BEML (-4.06 per cent), Titagarh Wagons (-8.40 per cent) and Kernex Microsystems (-4.89 per cent). The gainers among the metal and mining stocks, which gained from unchanged freight rates, included JSW Steel (1.45 per cent), Coal India (1.32 per cent), Hindalco (1.20 per cent), NMDC (0.62 per cent) and Tata Steel (0.08 per cent). Industry welcomed the budget’s focus on lower freight rate, speed and port connectivity.

Mukesh Butani, managing partner, BMR Legal said, "Proposal to develop a new freight tariff structure to evolve a competitive rate structure shall help railways regain market share vis-à-vis other transportation modes, particularly roads." Industry welcomed Railway Budget focus on lower freight rate, speed and improving port connectivity.

D. Bhattacharya, managing director, Hindalco and vice-chairman, Novelis, in a statement, said, “The railway budget is seeking to enhance the competitiveness of railways for goods traffic through announcements of review of the freight tariff structure, direct long-term freight negotiations with key partners, container trains with time-table and focus on improving connectivity to ports and speed of freight movement…. a win-win for the industry and the railways.”

raviranjan@mydigitalfc.com

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