Stocks To Watch After The Rail Budget

As expected the Railways Minster came up with a more passenger friendly Railway Budget. It has tried to balance the railway's finances and the sentiments of the market and the populace. Though the railways were expected to post losses this year too, Pawan Kumar Bansal, the Rail Minister expressed satisfaction over the estimated 88.8 per cent operation ratio that the utility was able to clock keeping it well within the average of 90 per cent average for the last decade. Apart from this, Indian Railways entered the 1 billion tonne club joining the likes of Chinese, Russian and US Railways.

The Railway minister has laid more thrust on Safety, Fiscal Discipline and provision of Amenities to passengers in the current budget. He has announced a Corporate Safety Plan for a ten-year period starting 2014 to 2024. He has also announced safety measures such as elimination of 10797 level crossings during the 12th plan, introduction of a Train Protection Warning System on Automatic Signaling Systems, rehabilitation of 17 distressed bridges over the next one year, provision of comprehensive fire and smoke detection systems, fire extinguishers and strengthening of the security of rail passengers, especially women passengers.

Further, Mr Bansal announced amenities for passengers such as cleanliness of 104 important stations, extension of bi-toilets on trains, extension of the on-board housekeeping scheme, setting up six more Rail Neer bottling plants, electronic display boards in trains, free Wi-Fi facilities on several trains, 179 escalators and 400 lifts at A-1 and other major stations, introduction of an “Anubhuti” coach in select trains to provide excellent ambiance, etc. These announcements certainly benefit companies such as Kernex Microsystems, Gabriel India, Zicom Electronic Security Systems among others.

The minister has declared that 67 new express trains and 26 new passenger trains will be started in the current financial year. Further, he has also announced the extension of 57 trains and increasing the frequency of 24 trains. First AC EMU will be introduced on Mumbai suburban network this year. The Railways have targeted 500 km of new lines, doubling of 750 km lines and 450 km of gauge conversion in the next fiscal. These infrastructural initiatives will be positive for the companies such as BEML, Titagarh Wagons, Texmaco Rail, CEBBCO, KEC International and Kalindee Rail Nirman.

There are also plans to build a coach manufacturing factory in Sonepat (Haryana); rehabilitation workshop at Karnool (Andhra Pradesh) and Misrod (Madhya Pradesh); and wagon maintenance workshop in Kalahandi (Odisha). This will have some negative impact on some of the private wagon manufacturing companies.

As far as passengers are concerned, the Minister has made every attempt to make them happy considering next years’ elections. However, transportation of goods will definitely have to bear the burden of this kindness. The Railway Minister has announced a Fuel Adjustment Component linked revision of freight tariff from April 01, 2013 onwards. This freight revision is expected to raise the freight charges by almost 5%. This is a major negative for the domestic markets and the reaction was instant. However, the proposal of setting up of a Railway Tariff Regulatory Authority may provide some solace.