Budgeted outlay for FY15 at 643.05 billion rupees, compared to 593.54 bln rupees for FY14, is just an 8.2 percent yearly growth, investors say.
Texmaco Rail & Engineering Ltd slumps 20 percent, while Kalindee Rail Nirman Engineers and BEML Ltd fall 5 percent each.
Titagarh Wagons Ltd, which has risen 183 percent in 2014 against the NSE index's gain of 23.65 percent, falls 5 percent.
Earlier, stocks of companies related to railways sector fell as much as 8 per cent in morning trade today due to profit-booking ahead of the railway budget to be presented shortly.
Shares of Texmaco Rail & Engineering tanked 7.72 per cent, while Titagarh Wagons plunged 4.99 per cent on the BSE Sensex.
Similarly, Kernex Microsystems fell by 4.93 per cent.
Rail stocks have surged in the past few days on hopes of some measures from this railway budget including FDI in railways, introduction of bullet trains, robust maintenance system for railway tracks, increasing the number of trains and raising the speed of trains.
In the stock market, the benchmark BSE Sensex was trading at 26,055.28, down 44.80 points at 1130 hours.