Rail Budget 2013: Rail stocks tank on Bansal’s austerity

MUMBAI: Stocks of most companies having close business links with the Indian Railways fell sharply on Tuesday after railway minister Pawan Kumar Bansal presented a budget that was seen to be in line with the government’s current focus on austerity to contain the overall deficit. Reacting to prospects of muted growth in the sector, stocks such as Stone India crashed 16.2% to Rs 20 while Kernex Micro lost 15.1% to Rs 44.Similarly, Kalindee Rail Nirman was down 11.2% to Rs 70. Other rolling stock companies like Texmaco Rail, Titagarh Wagons and BEML too closed lower, dealers said.
The proposals to lay 500 km of new lines, 750 km of doubling of lines and 450 km of gauge conversion target for fiscal 2014 was seen as not enough to bolster the growth of the industry. Besides, the budget also proposed scaling back the amount allocated for rolling stock (wagons, passenger bogies, locomotives, etc), affecting the stock prices of these companies.
Although there was not much to be made from the stocks of companies related to the Railways in Monday’s session, analysts and economists were positive to neutral in their rating of Bansal’s proposals. Economists at domestic broking major Kotak said that the rail budget was realistic which focused on achieving its targets rather than overachieving.
“The developmental targets in electrification, track renewals and new lines were kept modest without much deviation from FY13 achievements. In terms of finances, the Railways will have budgetary support of Rs 26,000 crore from the Union Budget and market borrowing of Rs 15,000 crore, similar to borrowings in FY13,” the report pointed out.
Economists at Religare, another domestic brokerage, said that the fiscal prudence showed by Bansal was the right thing to do given the current realities in the economy. Calling the proposals “on the right track with fiscal prudence”, the Religare report said that it was a balance between ‘austerity and responsibility’.
“Fare hikes have occurred in both passenger (reservation/tatkal/superfast fees) and freight segments (dynamic Fuel Adjustment Charge limited to 5% every year wef April 1), but not high enough to hurt business activity/sentiment. The plan outlay for fiscal 2014 is pegged at Rs 63,400 crore, a 5% increase over FY13 Budget, with substantial incremental funding coming via PPP route. Overall market borrowing has been kept under check, and the freight tonnage target has been kept largely flat (and realistic), reflecting the extant economic environment,” the report said.
Economists now believe that if the Railway Budget proposals were any indications to the Union Budget, then investors should expect the finance minister to target the fiscal prudence on Thursday too, and not go for pump-priming during the election year.
Budget 2013 > Rail Budget 2013 > Economic Survey 2013