IRFC, RVNL, select other railway stocks tank up to 21% in two days; here's what analysts suggest

Railway stocks have remained flavour of the Dalal Street for quite some time but as the broader market was gripped by bears since Tuesday, the listed public sector counters from the railway space have tumbled brutally. These stocks have witnessed a correction of about 21 per cent in two days.

Railway stocks including Indian Railway Finance Corporation (IRFC), IRCON International, RailTel Corporation of India and Rail Vikas Nigam have plunged up to 21 per cent from their respective 52-week highs hit on Tuesday, September 13. Even on an intraday basis, these stocks posted steep cuts on Wednesday.

IRFC, the largest railway player with an mcap of more than 1 lakh crore, dropped more than 9 per cent to Rs 75.33 on Monday, while IRCON International also cracked more than 9 per cent to Rs 137.45 on Wednesday. Railtel Corporation tumbled over 8 per cent, while RNVL cracked about 7 per cent for the day.

This sudden and severe correction in the railway stocks has left existing investors baffled if they should book the profits after a stronger rally or hold the stock. Similarly, those who missed the bus are wondering if they should buy the dips at current levels or more weakness is warranted.

Analysts, both technical and fundamental, are suggesting investors to buy the dips but be more realistic about the valuations. They suggest that the investors should not go all guns blazing over these counters but those with a long-term view can accumulate at lower levels.

Mahesh M Ojha AVP – Research and Business Development at Hensex Securities said that investors with a long-term view can buy the railway stocks at dips as the fundamentals of the companies have not changed. "Such corrections are healthy for the markets and provide an opportunity for the investors to accumulate quality stock but investors should study the business before investing."

However, others suggest that buying the dips should come with a word of caution. All railway stocks have different business models and fundamentals and investors should understand them before investing, said Kranthi Bathini, Equity strategist at WealthMills Securities.

"One should avoid those counters, where valuations have stretched beyond the fundamental strength of the company. More correction is cautioned in these counters and one should buy on the quality names, only after the euphoria is over," he said. "But buying the dips can be considered if the valuations provide some cushion."

On a technical basis, Pravesh Gour, Senior Technical Analyst at Swastika Investmart has suggested to buy Indian Railway Finance Corporation (IRFC), Ircon International and Rail Vikas Nigam (RVNL) on dips. He has a target price of Rs 80, Rs 160 and Rs 200, respectively for these counters.


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