It is that time of the year again. The stock prices of companies catering to Indian Railways have begun their annual rally ahead of the Rail Budget to be presented on February 25. The same stocks fall right after the event.
The share prices of Stone India, Kernex Microsystems, Texmaco, Kalindee Rail Nirman, Titagarh Wagon, BEML and Simplex Castings have moved up between nine and 32 per cent in just four trading sessions. Even while Texmaco is moving up sharply, the company’s wagon manufacturing business has been passed on to a separate company known as Texmaco Rail, which is yet to be listed. The current Texmaco will be involved in real estate and investment businesses.
“This has become an annual phenomena. Railway stocks have become a safe bet for punters ahead of the budget, asthe majority of rRailway orders go to only these companies,” said S P Tulsian, independent equity advisor.
Till last week, most of these shares were trading near their 52-week low, as the market had gone into a tailspin after a sharp correction.
In 2009, there was an up move of five to 28 per cent in these stocks in three trading sessions after June 20, before minister Mamata Banarjee was to present her first budget on July 3, following the victory of the United Progressive Alliance in parliamentary elections. The stocks cooled off significantly after the budget.
Kalindee Rail, involved in installation of signalling and telecommunication projects and execution of gauge conversion, gained nearly 30 per cent in 10 trading sessions and was trading at over Rs 500 a share before then railway minister Lalu Prasad was to present the Budget in 2008. It slipped to around Rs 350 within a few days after the Budget.
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In 2008, Kernex Micro, in the monopoly business of train anti-collusion dividers, gained around 45 per cent in 10 trading sessions from a level of Rs 160 to Rs 230. In the 10 trading sessions, post-budget, the stock slipped back to around Rs 155.
Prior to the 2007 Railway Budget, Kernex Micro gained 17 per cent in the five trading sessions from Rs 145. After the Budget, the stock was back to the same level.
In 2007, Kalindee Rail had gained 23 per cent in 10 trading sessions from Rs 160 prior to the Budget announcements. The stock was again traded at around Rs 160 in the next three trading sessions. A similar pattern was witnessed in 2006 as well and stocks which had gained significantly prior to the Budget fell.