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Railway stocks derail ahead of the budget; Wagon makers in focus March 14
March, 13th 2012

Railway stocks corrected on Tuesday ahead of the upcoming Railway Budget 2012. On Wednesday, March 14, Minister for Railways, Dinesh Trivedi would be presenting the Railway Budget for the financial year 2012-2013.

According to analysts, wagon makers such as Titagarh Wagons, Texmaco will be in limelight, as lot of wagon companies are likely to get big orders to improve safety measures.

"There is an urgent requirement for capacity augmentation in rakes, wagons and racks and it should be substantially increased to cater to the increasing demand. The budget should also focus on modernization of rail network which include automation of signaling system, strengthening of track and procurement of modern rolling stock," said Indresh Batra, Chairman, Jindal ITF on the expectations from Railway Budget 2012.

The rail minister has already surprised most of the analysts on the street by hiking the freight rates on March 6th. The rates for coal as well as cement products have already gone up by 20%.

Earlier in the month, Indian Railways hiked freight rates which varied from commodity to commodity ranging between 15% to 35%. While for coal and cement, the hike is between 18% to 24%, for foodgrains and fertliser, the increase is between 20% to 35%.

However, they have reduced freight rate for iron ore export by 16% while there is an increase by 20% for domestic consumption. Railway aims to earn between Rs 15,000 crore to Rs 20,000 crore in the next fiscal.

Most of the analysts are anticipating that the budgetary allocation for railways will go up nearly 50%. Last year, the budgetary support was close to Rs 20,000 crores, this year it is expected to be around Rs 30,000 crores.

Experts are also not ruling out a fuel surcharge which would be levied on AC passenger fair as well as freight. The said move could be negative for coal, cement and steel companies because they have already announced the hike of freight up to 20%

Addition in fuel surcharge would increase the cost of freight by nearly 2%.

Duty rationalization should be done in rail freight charges to give a boost to this industry. Work on the dedicated freight lines should be accelerated to avoid congestion on the operative routes," added Indresh Batra.

According to reports, the budget should focus more on adding to the rail infrastructure, railway modernisation which was recommended by Sam Pitroda Committee, passenger security and work on the dedicated freight lines, should be accelerated to avoid congestion on the operative routes.

Possibly companies like IVRCL, NCC, Era Infrastructure and Kalindee Rail could be the potential beneficiaries if there is a substantial amount of allocation done in modernisation of railway.

Safety of passengers is also one of the concerns which could be highlighted in the budget.

If railways minister giver anti-collision system orders to boost passenger safety. Companies like Siemens and Kernex would benefit from anti-collision system orders.

Kunal Saraogi of Equityrush. Com feels that rail stocks should see the recent excitement petering out post the budget given that their chart structures look precarious. We recommend that investors steer clear of them all and focus on other sectors instead.

Titagarh Wagons closed 0.89% lower at Rs 429.85. BEML slipped 1.08% to Rs 681.10. Stone India ended 3.8% lower at Rs 34.75 while Kalindee Rail Nigam moved down 2.1% to Rs 112.20.

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