Indian Railways is one of the world’s largest and fast-growing networks. This makes investing in rail stocks an interesting proposition. However, before investing, you need to have a clear idea about the industry’s prospects.
Taking a close look at some of the best-performing Indian railway stocks in 2024 will help you decide where to invest. The 2024 budget has given a boost to rail stocks in India. This is enough for investors to gain confidence and check the railway stocks list. Let us understand the railway industry in India and discuss some of the prominent rail stocks.
Railway industry in India: A ringside view
The railway industry in India, which traces its origins to the British days, is a vast network with 7,349 small and big stations, 8,479 freight trains, 13,169 passenger trains, and close to 23 million daily passengers. Indian railways had its humble beginnings in 1853 when the first train ran from Mumbai to Thane.
Many trains connect remote villages to big cities. The luxurious Vande Bharat Express brings comfort and speed together. Freight trains ensure the steady movement of goods and commodities across the country.
Despite its long history, Indian Railway is often plagued by funding concerns and safety issues. However, massive railway projects and significant investments in infrastructure make it a good sector to bet on for investors.
Best railway shares in India (as per market capitalization)
Rail shares in India are the stocks of the companies that have direct or indirect links with daily operations of Indian railways. These companies include coach manufacturers, those that facilitate passenger services, or deal with freight services. Share prices of many of these firms are directly linked to the fortunes of the Indian Railways.
You can directly invest in railway shares by downloading the Lemonn app, India’s newly-minted stock broking app. Below are some of the best railway shares in India, according to market capitalization.
- Indian Railway Finance Corp Ltd (IRFC)
- Indian Railway Catering and Tourism Corporation Ltd (IRCTC)
- Rail Vikas Nigam Ltd. (RVNL)
- Container Corporation of India Ltd (CONCOR)
- Rites Limited (RITES)
Besides these top five railway shares, some of the other value railway stocks in India are Jupiter Wagons Ltd., Railtel Corporation of India Ltd., and Ramkrishna Forgings Ltd. A brief overview of these best railway stocks in India will help you to choose your pick.
Overview of the top railway stocks in India
Now that you have the railway stocks list of top-performing companies, it would help if you are familiar with what these companies do.
1. Indian Railway Fin Corp Ltd. (IRFC)
IRFC started its journey way back in 1986. It is the most influential financial arm for Indian Railways. The firm’s responsibility lies mainly in securing financial support for Indian Railways through funds.
2. Indian Railway Catering and Tourism Corp. (IRCTC)
Launched in 1999, IRCTC facilitates online booking of railway tickets and distribution of food to railway passengers, not to mention organizing customized package rail tours to tourist destinations in India. From executive lounges to mobile charging, IRCTC provides the full range of passenger services.
3. Rail Vikas Nigam Ltd (RVNL)
RVNL deals with the infrastructure development of railway networks in India. From making railway tracks to bridges to supplying electricity to the massive network, RVNL is responsible for it all.
4. Container Corp. of India Ltd (CONCOR)
Since 1988, CONCOR Ltd. has served Indian Railways by managing the logistics department. It oversees handling the movement of massive containers across railways, airways, and roadways.
5. Rites Limited (RITES)
RITES is a wholly owned subsidiary of Indian Railways, Ministry of Railways, Government of India. The firm is a leading multidisciplinary engineering and consultancy that provides services to sectors such as railways, highways, and airports.
Factors to consider before investing in railway stocks in India
Before you start investing in a company from this railway stock list, it is important for you to understand a few factors that impact the fortunes of the sector. Some of them are listed below.
A. Government policies and regulations
Government policies and regulations impact the operations of Indian Railways and stocks allied to the sector. Indian Railways is under the ambit of the government of India. Therefore, check government policies before investing.
You can start by reviewing the recent budget and how much it allocates for the railway sector. The recent push towards privatizing most of the operations of railways gives massive opportunities for private companies to participate in regular railway operations.
In contrast, government subsidies to maintain the affordability of ticket prices, though beneficial for passengers, can impact the profitability of railways. For instance, the IRCTC’s profit margin stays low due to such government subsidies.
B. Financial performance
Before investing, you need to investigate the financial health of the rail stock you plan to buy. You can start by analyzing the annual revenue generation of the best railway stocks in India. Also, check the net profit ratio of these companies, operating profit margins, and return on equity to assess your chances of making investment gains.
The company’s debt and cost management are other financial factors you need to consider.
C. Technological advancements
Technology and potential growth are closely related. Make sure the rail stock you are thinking of buying is up to date with technological advancements and digitalization of services.
Technical advancements ensure more efficiency, safety, and probability of growth. Therefore, prioritize the organization that supports automation, innovation, electrification, and digitalization of their services.
D. Risk factors
However, railway stocks in India are prone to risks such as economic downturns and operational and regulatory challenges. You need to take stock of the risks of investing in such stocks before proceeding.
For instance, the rising number of railway accidents has dented people’s trust in railway services.
E. Demand trends
Passenger demand impacts the vast railway network that crisscrosses the country. Urbanization, shifting demand for commodities, and trade dynamics influence railway stocks in India.
The increasing economic growth and rising per capita income also bode well for growth of the railway sector. Consider these factors and demand trends to make a sound decision while investing.
Should you invest in railway stocks?
Clearly, railway stocks in India are getting increased investor attention. The companies on our railway stocks list are witnessing steady growth. Thanks to the government’s focus on improving railway infrastructure, the railway sector is witnessing massive technological advancements.
However, you need to consider the extreme dependency of this industry on passenger preferences and government policies. Whether you should invest in railway stocks depends ultimately on your preferences after analyzing these factors.
Conclusion
Indian Railways, aided by government support and its expanding network, looks poised for a bright future. With the widening scope for privatization, more investors are showing interest in the best railway stocks in India. Yet, investors would do well to keep the big picture in mind and choose stocks that tick the right boxes.
