The rally was led by Jupiter Wagons, which is up nearly 37% in five days, the strongest performer among railroad stocks. Rail Vikas Nigam Ltd. (RVNL) is up about 27%, while Indian Railway Finance Corp. (IRFC) has risen more than 20% in the same period. Other names including Ircon, Titagarh Rail Systems, RailTel, Texmaco Rail, RITES and BEML have also posted double-digit gains.
Despite the sharp rebound, most stocks remain well below their peaks. Several rail counters are still 40 to 60% lower than ever before, underscoring how severe the correction has been since early 2024. Full-year returns also remain negative across much of the basket, highlighting that the recent rise is a recovery rather than a complete reversal.
A key catalyst in the short term was Indian Railways’ revised passenger fare structure, which came into effect on December 26, marking the second fare hike in FY26. The increase of 1-2 paise per kilometer for long-distance travel by regular, mail and express trains is expected to generate around ₹600 crore in additional revenue during the rest of the financial year. Suburban services were excluded from the increase.
Passenger services are currently operating at a loss, with fares estimated to be almost 45% below cost, subsidized by freight revenue. The fare rationalization improves revenue visibility and supports efforts to limit passenger traffic losses, allowing the railways to work towards a better operating ratio, which is expected to remain high this year. Investor sentiment has also been boosted by budget expectations. Market participants are eyeing higher allocations for railway safety and infrastructure in the 2026-2027 Union Budget, with news reports pointing to a possible record investment of around ₹1.3 trillion, almost half of the total railway investments.
What further increases the optimism is the influx of orders. RVNL recently received a new project award from Northeastern Railway for bridge construction, strengthening its already robust order book and providing support to EPC-focused names.
Still, analysts caution against extrapolating the recent rally too far. “The sharp decline in railway stocks over the past year is mainly due to valuation corrections after a period of extreme ‘irrational exuberance’,” said Santosh Meena, head of research at Swastika Investmart. He noted that several railway PSUs saw their share prices double or triple in early 2024, pushing valuations well above earnings growth.
Meena said the railway allocation of ₹2.65 lakh crore for FY26, which remained largely unchanged in the 2025 budget, thwarted expectations of an endless expansion in capital expenditure. “While a pre-Budget hype rally is a historical pattern, the market will likely demand concrete evidence of improved margins and faster project commissioning in 2026 before recommitting to previous industry highs,” he said. He added that anticipation is building for the 2026-2027 budget, where market rumors point to a 10-12% increase in capital expenditure, which could potentially fund projects like the Vande Bharat sleeper trains and higher expenditure on the Kavach safety system.
Others see the rally as largely sentiment-driven. Sunny Agrawal, Head of Fundamental Research at SBI Securities, said the move was triggered by the conversion of a preferential issue by the promoters of Jupiter Wagons, which subsequently spilled over into other railway EPC stocks. “With the Union Budget kicking off in about a month’s time, we are witnessing increased activity not just in railway stocks but also across the defense sector,” he said.
Agrawal added that vehicle-related businesses remain structurally more attractive, and any sharp pre-budget rally should be seen as an opportunity to book profits, rather than chasing momentum.
For now, the sharp five-day rise in the rail package suggests that, after a 17-month slump, investors are once again willing to bet, albeit cautiously, on a sector that remains closely linked to policy signals, implementation outcomes and the government’s infrastructure agenda.
(Disclaimer: Recommendations, suggestions, views and opinions expressed by the experts are their own. These do not represent the views of The Economic Times)
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