Railway stocks continued their downward spiral on Wednesday as brokerages expect a correction in the overvalued sector after an unexpected election verdict.
What Happened: Railway stocks continued their decline on Wednesday as the Bharatiya Janata Party failed to get a mandate on its own in the recently concluded Lok Sabha election.
Railway stocks had shot up on Monday as exit polls predicted a strong mandate for the government, catapulting the stocks on hopes of policy continuity in the railway sector.
Analysts’ Views: With the current verdict, analysts said sectors like railway, which are now overvalued, might see correction until risk-reward becomes favourable.
Motilal Oswal said sectors with over-heated valuations and recent sharp outperformance such as industrials, railways, defence and public sector firms may see more moderation in valuations before they become attractive again from the risk-reward perspective.
Kotak Institutional Equities said the market's investment stance towards "narrative stocks" (capital goods, electric utilities and PSUs) has changed. These stocks have rallied sharply in last 12-15 months and have large downside to their fundamental fair values, it said. The brokerage also said these stocks trade at “rich” to “bubble” values.
Price Action: Most railway stocks were trading down 1-5% on Wednesday.
RVNL shares traded down 5.06% at ₹333.70
IRFC shares traded down 1.94% at ₹161.75.
RITES shares traded 5.25% down at ₹591.65.
IRCON shares traded down 3.73% at ₹228.45.
IRCTC shares traded down 3.74% at ₹877.95.
Titagarh Rail Systems shares traded down 12.55% at ₹1,046.95.
Jupiter Wagons shares traded down 3.41% at ₹507.00.
Texmaco Rail shares traded down 1.19% at ₹169.85.
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