Business News

Amid hopes of a recovery in central government capex in H2 and the major announcements from the Union Budget, which is less than two months away, rail stocks were trading higher on Wednesday. Titagarh Rail Systems shares led the rally and were up about 9%.Texmaco Rail shares were trading 6% higher, while those of RailTel, IRFC, IRCON and RVNL - all PSUs - were trading 4-5% higher.The buying in rail stocks comes at a time when there is a near-consensus opinion on the Street that a strong recovery is likely in the second half of FYY25 when it comes to government capex."Our meetings in Delhi earlier this month, on-ground feedback, and movement in government balances seem to indicate the same. Defense and Roadways are expected beneficiaries, and our best way to play these are L&T, HG Infra, Hitachi Energy, Ashok Leyland, and Voltamp," said Seshadri Sen of Emkay Global.Also read | Sleeping giant HDFC Bank shares wake up with Rs 3 lakh crore rallyDefence, roadways, and communication could show a sharp sequential jump, whereas railways is, surprisingly, ahead of the full-year run-rate and may not show strong H2 seasonality, he said.Market experts say the Centre’s capex spending is expected to catch-up after the pace in the first half was below expectations."The centre’s capex disbursements will need to more than double in the next five months in nominal terms to meet the annual INR 11.1trn target. Overall expenditure will need to increase by 17% between Oct24 to Mar25, with capital spending up a sharp 52% to meet annual targets. Resumption in capex disbursements is not only a necessary boost to growth (favourable fiscal impulse) for related sub-sectors, for instance construction and materials, but also to draw in the private sector by positive multipliers," said Radhika Rao, Executive Director and Senior Economist, DBS Bank.Rail stocks also have a tendency to rally ahead of the Budget on hopes of an increase in infrastructure spending.