Railway Sectors to Track Before Union Budget 2024

As the Union Budget 2024 approaches on July 23, 2024, we witness volatility in the Indian stock market. There are numerous assumptions regarding tax deductions and many debates about what should and should not be included in this budget.

Industry Calls for Infrastructure Investment with Safety as Top Priority

Indian railway industry is urging the government to stay focused on capex on improving and expanding railways. They believe this investment is crucial for growth. Industry leaders want the government to prioritize creating special economic corridors that were announced earlier.These corridors will prioritize industries such as energy, minerals, and cement. They aim to improve how different parts of the country are connected and boost economic activity. Industry also wants more investment in new technologies like rail road connections, Internet of Things (IoT), automation, blockchain, cloud computing, Artificial Intelligence (AI) and robotics. These advancements are expected to make transporting goods more efficient.

Despite the railway industry's focus on growth, the recent Kanchanjunga Express crash in June has brought back worries about safety. People are asking the government to make safety a top priority in the upcoming budget.

PLI Scheme

A new production linked incentive (PLI) scheme aims to increase domestic production of parts used in railways. This initiative encourages businesses to manufacture these parts in India, reducing our reliance on imported goods and boosting exports. It's designed to create a more supportive environment for companies in the railway components sector and attract foreign investment.

In the upcoming Indian Railways budget, there is a requirement to achieve a balanced approach. There's a strong demand for continued growth and infrastructure development. On the other, there's a critical need to address safety concerns. The government must carefully consider these conflicting priorities when deciding how to allocate funds in the upcoming budget.

Railway Stocks in Focus

Investors interested in benefiting from the government's emphasis on the railway sector should monitor stocks such as:

1. Titagarh Wagons: Make freight wagons and passenger coaches for Indian railways.

2. Texmaco Rail & Engineering: Produce railway freight cars and other important components.

3. Gateway Distriparks: Handle logistics and transportation offering services at rail terminals and container freight stations.

4. Hind Rectifiers: specializes in supplying crucial power semiconductor devices essential for railway electrification projects.

5. L&T Construction: Specialize in railway construction, electrification and signaling.

6. Bharat Heavy Electricals: Manufacture traction motors and transformers needed for railway electrification and modernization.

Other notable mentions include BEML, RVNL, IRFC and Ircon. These companies play crucial roles in various aspects of India’s railway sector from building infrastructure to integrating technology and are likely to benefit from government efforts to improve rail connectivity and efficiency.

Sectorial Outlook

As per the experts, there is the possibility of the government increasing its spending on sectors like power, railways and infrastructure. Looking ahead to the Union Budget 2024, if the government maintains or exceeds the previous year's allocation of ₹10 lakh crore for infrastructure development, it could boost market sentiment. Continued investment in infrastructure is expected to strengthen the Indian economy.

Infrastructure is crucial for economic growth and stocks in this sector such as Larsen & Toubro, Adani Ports and UltraTech Cement are likely to benefit from increased government spending. These companies are well positioned to grow as infrastructure projects expand. Therefore, the continuation or increase in infrastructure investments in the upcoming budget is anticipated to provide a substantial uplift to these companies and the broader market.

The upcoming Union Budget for 2024 is expected to provide support to the defence sector, aligning with the Make in India initiative that promotes local manufacturing. Over the past few years both the railway and defence sectors have been favored by investors, showing robust growth. The momentum in defence investments is likely to persist with potential increases in orders and budget allocations anticipated in the upcoming budget. This reflects ongoing efforts to bolster Indigenous defence capabilities and stimulate economic growth through strategic investments in key sectors.

Final Words

After the Union Budget of 2024, Indian stock markets are expected to stay positive, assuming there are no negative announcements. If the economy continues to grow strongly without setbacks, the markets should perform well. People are watching for changes in tax rates that could affect investments like Securities Transaction Tax (STT), capital gains taxes and taxes on futures and options (F&O). If these remain stable or favorable, it would be good for the markets. Investors might see some profit taking at times but overall the outlook is positive.

For investments after the budget defense, railways and agro sectors like fertilizers, Infrastructure could offer good opportunities.