Railway shares have fallen sharply, with some dropping as much as 33% in the last two days, due to worries about policy stability following Prime Minister Narendra Modi’s alliance’s narrow election victory.
Shares of Titagarh Rail Systems plunged nearly 33%, while Ircon International dropped over 26%. RailTel Corporation and IRCTC also fell more than 19% in the past two days. Other railway companies like RITES, IRFC, RVNL, Texmaco Rail Systems, and Jupiter Wagons saw declines between 18-23%. On Wednesday, railway stocks fell by up to 17%.
BJP’s Election Performance
According to the election commission, the Bharatiya Janata Party (BJP) won 240 seats, which is below the 272 needed for a simple majority in the 543-member parliament.
Motilal Oswal, a brokerage firm, commented, “Even with a reduced majority, we expect Modi’s policy agenda focused on investment-led growth, infrastructure, and manufacturing to continue, though there may be some changes.”
Future Outlook
They also noted that sectors with high valuations and recent strong performance, such as Industrials, Railways, Defense, and PSUs, might see further drops in valuations before becoming attractive for investment again. Other PSU stocks, including Cochin Shipyard and Bharat Dynamics, dropped by 10%, as the BSE PSU index fell by 4%. Stocks like NBCC, HUDCO, Indian Bank, and REC saw declines of over 5%. Shares of NTPC, CONCOR, Hindustan Copper, GIC, Central Bank of India, NMDC, Powergrid, PFC, BEL, PNB, UCO Bank, Union Bank of India, HAL, BHEL, and SJVN fell by more than 3%.
Despite the declines, analysts are still positive about PSUs as the BJP is expected to remain in power.
Manish Sonthalia, Chief Investment Officer at Emkay Investment Managers, expects the BFSI sector, PSUs, and industrials to perform well. “BFSI has driven earnings growth and seen a correction in valuation. Investment themes will emerge with power capex increasing over the next 3 to 5 years. We are reassessing public sector units, as some government entities will benefit in sectors like defense, oil marketing, and power financing,” Sonthalia said.
The Chief Investment Officer of Quant Mutual Fund believes that Modi’s return to power endorses the previous government’s policies, suggesting that infrastructure, manufacturing, and PSU themes will continue.
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