List of Best Railway Stocks in India 2024

Indian Railways plays an important role in connecting different parts of the country, facilitating transportation, and contributing to the economic development of the country. It is often regarded as the “Lifeline of the Nation.” 

In this blog, we will explore the railway sector and discuss services offered by the top railway companies in India operating in the sector.

The railway sector is considered a monopoly because of the significant entry barriers that make it difficult for other companies to compete. For example, building, running, and maintaining rail services require huge investments. In addition, most railway systems are publicly owned, which further contributes to their monopoly status.

Overview of the Railway Sector in India

The railway industry in India is one of the largest and most complex in the world. It was established more than 150 years ago when the first passenger train in India ran from Mumbai to Thane on April 16, 1853. Over the decades, the network expanded significantly. The economic impact of this sector is huge as it generates employment and revenue, which makes it a significant contributor to the GDP.

Key services provided by the railway sector are: 

• Passenger Services: Local Trains, Long Distance Trains and Luxury trains
• Freight Services: Transportation of commodities like coal, iron ore, cement, grains, etc.

Top Railway Stocks Based on Market Capitalization

The top Railway stocks in 2024 are:

The railway stocks have been listed in descending order based on their market capitalization in the table below:

6 Months & 1 Year Return of Top Railway Stocks

Best Railway Stocks in India 2024 Based on Market Capitalization – An Overview

The best railway stocks in India are given below, along with a brief overview of the services they provide:

1. Indian Railway Finance Corporation (IRFC)

IRFC was incorporated in 1986, and its main business activity is to raise funds from the financial markets to acquire or manufacture assets, which are then leased out to the Indian Railways as a finance lease. It is under the Government of India, and the Ministry of Railways has administrative control over it. It was listed on the stock exchange on 29 January 2021.

2. Rail Vikas Nigam (RVNL)

Rail Vikas Nigam is the construction arm of the Ministry of Railways and is involved in various rail infrastructure projects. It was established in 2003 to meet the rising demand for rail infrastructure. It was listed on the stock exchange on 19 April 2019. 

3. Indian Railway Catering and Tourism Corporation (IRCTC)

IRCTC was incorporated in 1999 and is one of the most important companies operating in the railways sector. It provides ticketing, catering, and tourism services to its customers. IRCTC was listed on the stock exchange on October 14, 2019. 

4. IRCON International Ltd.

IRCON was incorporated in 1976 and is primarily involved in railway infrastructure projects in India and abroad. In addition to the railway projects, it also builds ports and highways. The company has expertise in completing challenging projects. IRCON won the “Navratna” status in 2023 due to its strategic importance. IRCON was listed on the stock exchange on September 28, 2018

5. Titagarh Rail Systems Ltd.

Titagarh Rail Systems is a private-sector company that manufactures railway wagons. It was incorporated in 1984 as a rolling stock foundry unit and, in 1997, manufactured its first railway freight wagon. It was formerly known as Titagarh Wagons Limited. Apart from freight coaches, the company also manufactures Metro trains, train electricals, steel castings, etc, for both domestic consumption and export markets.

6. BEML Ltd.

BEML, or Bharat Earth Movers Ltd., manufactures heavy machinery used in Indian Railways, defense forces, Metro, and the construction industry.  It was established on 11 May 1964 and is headquartered in Bangalore. It has manufacturing facilities in Kolar Gold Fields, Mysore, Pallakad, and Bangalore. The Government of India owns 54.03% of BEML and has plans to divest its stake in the future.

7. RITES

RITES, or Rail India Technical and Economic Service, is a public sector enterprise involved in delivering transport consultancy and engineering services. It was established in 1974 and has its headquarters in Gurgaon, India. RITES is also involved in export activities and has clients in more than 55 countries. In 2023, RITES was given the “Navratna” status by the Ministry of Finance. 

Key Performance Indicators of Railway Stocks

Benefits of Investing in Railway Stocks

Indian railway stocks have been experiencing an upward trend for more than a year due to several factors. Here are some of the key factors:

1. Government focus & Initiatives

• Infrastructure Development: The government is investing significantly in railway infrastructure, including modernization, electrification, and the development of high-speed rail corridors.
• Dedicated Freight Corridors (DFCs): Progress on the DFC projects aimed at increasing freight capacity and reducing blockages on existing lines.

2. Policy Reforms

• Privatization: Initiatives to involve private players in operations and station redevelopment, hence increasing efficiency and quality of services.
• Favorable Policies: Reforms and policy changes aimed at improving the operational efficiency and profitability of railway companies.

3. Financial Performance

• Strong Earnings: Positive financial results (because of various policy reforms and Government initiatives) from key railway PSUs like IRCTC, IRFC, and RITES.
• Cost Management: Effective cost management and reduction in operational expenses have resulted in better profit margins.

4. Increased Demand

• Passenger Traffic: Revival in passenger traffic post-pandemic, with increasing demand for travel and tourism.
• Freight Services: Growth in freight volumes driven by economic recovery and increased industrial activity.

5. Technological Advancements

• Digital Transformation: Implementation of digital services like online ticketing, real-time tracking, and e-commerce integration.
• Modernization: Modern technologies in signaling, communication, and rolling stock are adopted to enhance safety and efficiency.

7. Investors Sentiment: 

• Investor Sentiment: Positive investor sentiment towards infrastructure and transportation sectors, driven by expectations of sustained economic growth.

8. Strategic Partnerships and Expansion

• International Ventures: Companies like RITES and IRCON are expanding their business operations internationally, securing contracts and consultancy projects abroad.
• Collaborations: Strategic partnerships with global players to enhance technological and operational efficiency.

Factors to consider before investing in Railway Stocks

An investor must consider the following factors before investing in railway stocks:

• Type of Competition: Some companies are monopolistic or have a strong market position in their respective niches.
• Government policies: Investors must stay updated about recent or upcoming policy changes related to the railway sector.
• Investment profile of the sector: Continuous government investment and reforms in the railway sector change the dynamics of the industry.
• Economic indicators: Overall economic conditions and their impact on demand for transportation influence the whole sector.
• Technological advancements: Adoption of new technologies and modernization efforts makes the sector more accessible and attractive.

Future of the Railway Industry

The railway sector is of strategic importance in the Indian economy, and its future growth depends on the following factors:

• Privatization: Initiatives to involve private players in operations, maintenance, and infrastructure development will increase the quality of service.
• Sustainability: Focus on green initiatives and sustainable practices.
• Technological Advancements: The adoption of cutting-edge technology in operations and customer services will increase the operational efficiency of the companies.

Conclusion

Indian Railways remains a major part of India’s transportation network, with the government’s focus and ongoing efforts to modernize and improve its services to meet future demands. The combination of government support, financial performance, recovery in demand, and positive economic indicators contribute to the price rise of Indian Railway sector companies. Investors are optimistic about the sector’s future growth and profitability potential, making it an attractive investment opportunity. For those considering investing, exploring all railway stocks can provide a comprehensive view of opportunities in this promising sector., but before investing, it’s always advisable to do thorough research or consult with a financial advisor to understand the risks and potential of these stocks.

Frequently Asked Questions (FAQs)