Top 9 railways stocks which have more than doubled in the last one year

NEW DELHI: The buzz is big at the rail counter, hours before minister Suresh Prabhu's unveils his plan for the national transporter, taking forward the theme of shunning populism and regionalism in his first rail budget.

Whatever comes up, so far, it's been a smooth running for rail stocks, which have been on an uptrend in the last one year on hopes of big- ticket reforms. However, analysts sound caution and want investors to hold on to their nerves and wait for actual announcements before making fresh allocations.

The valuations of most railway counters have run up in anticipation of reforms. Wagon manufacturers, signal system makers or even rail logistic players have seen valuations expand exponentially.

"Many of the railway stocks have valuations on higher side, but companies are likely to get benefited with higher amount of order inflow coming in from this particular segment," said Vivek Gupta, CMT - Director Research, CapitalVia Global Research Limited.

"Investors should look for strong fundamentally strong companies that are fairly valued because a distinct possibility is that the stock may react negatively after the budget," he adds.

Most of the stocks mentioned have already rallied ahead of fundamentals and the real value will emerge once the reforms takes shape, say analysts. They should have a time horizon of at least 3-4 years.

"Investors are advised to choose invest in this sector with long term investment horizon only and choose fundamentally strong companies for reasonable returns," says Jayant Manglik, President - Retail Distribution, Religare Securities Limited.

The government in its Budget announcement last year said that it will closely monitor the dedicated freight corridor project implementation of eastern and western DFCs. It has also kept a target of nearly 1000 km of civil construction contracts.

"The 3,300-km-long project, which will crisscross various states, shall transform India's economic transport facility. It is expected that the Railway Ministry will come up with a concrete plan to fast pace the Dedicated Freight Corridor (DFC) connecting Delhi to Mumbai and Ludhiana to Dankuni in West Bengal," says Jayant Manglik, President - Retail Distribution, Religare Securities Limited.

"It is also expected that the new rail budget will enable the establishment of world-class manufacturing facilities. This year's budget might also focus on areas such as extended use of automation and technology so that manpower can be reduced," he adds.

Even though hopes are running high, nothing concrete has happened on the ground. Foreign investors yet to show any interest in railway projects under the FDI route.

Last year, the government allowed 100 per cent FDI in railway infrastructure segments such as electrification, signalling, high speed and suburban corridors.

Analysts' across brokerage firms advise investors to remain cautious on the space and if possible book profits in stocks which have already given handsome returns. Make fresh investments after hearing actual announcements in the budget.

"If you see the most obvious beneficiaries of the Railway Budget announcements have already gained quite a bit of traction and in fact we are recommending booking profits in the likes of Texmaco Rail," said Prakash Diwan, Director, Altamount Capital Management.

"My sense is there will be a lot of other players will kind of benefit because this time around the government is not just looking at announcing newer trains and the traditional stuff that we have seen in budgets till now, it could be lot of expansionary mode that the government would be into and which means newer companies, newer players would be able to get some sort of pie," he adds.

In terms of our positioning, we have booked profits wherever we had some holdings and the stocks have run up very-very handsomely in the last couple of months, adds Diwan. We would rather wait and watch for the announcements, he said.