The bullet speed at which the rail stocks rolled after the railway budget on February 24, had hit the speed-barrier, with many shares overturning as much as 26% within a month. The rally in the ?rail stocks? was flagged off by railway minister Mamata Banarjee with a promise of abundant room for private players in the country?s largest public sector service provider, Indian Railways.
The minister promised a riot of projects, from railway land development and higher safety measures to development of logistics parks, warehouses and over 100 budget hotels with private participation.
Rail stocks, as they are referred to in the market, are the shares of a clutch of companies doing business with the Indian Railways, including firms that supply critical parts and safety and communication equipment. These companies were hoping for a windfall from the projects announced in the rail budget and their shares staged a smart rally till the market found the devil in the details.
?Many projects announced in the rail budget promising a greater role for the private sector will take years to come up, as the government had only set aside paltry sums for the execution of these projects. Though the market reacted positively, the correction was inevitable once the cat was out of the bag?, said a trader with a leading fund house, who didn?t want to be named.
The worst hit in the rail stock tragedy is the Kalindee Railnirman, which tanked by over 26 % to Rs 135.3 on March 26 from the closing price of Rs 183.5 on February 24.
The company provides signalling and communication solutions to the Railways and also takes up gauge conversion projects. Another major causality is Kernex Microsystems, which supplies safety systems like anti-collision devices to the Railways. The stock has lost close to 25% of its value since February 24 to close at Rs 106.85 on the BSE on Friday.
The other major victims include Stone India, Hind Rectifiers, Titagarh Wagons, and Zicom Electronics. While stone India makes products like alternators, air brakes and brake regulators for the Railways, Hind Rectifiers produce and supply a wide array of products used by the Railways, including AC electric locomotives.
The Sensex has closed on February 24 at 16,255.97 and on March 26 at 17,588.85, showing a gain of over 8%. But the rail stocks had trailed the index by a wide margin.