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On February 1, Finance Minister Nirmala Sitharaman reduced the railway budget allocation to Rs 2.55 lakh crore for the Union Budget 2025-26
Budget 2025 derails railway stock momentum
Shares of Jupiter Wagons fell by as much as 8% on Monday, reaching Rs 347.4 on the BSE, while Ircon International dropped 5.6%, falling to Rs 189.75. This decline followed the Union Budget for FY26, which did not meet expectations for a significant increase in railway capital expenditure.
On February 1, Finance Minister Nirmala Sitharaman reduced the railway budget allocation to Rs 2.55 lakh crore for the Union Budget 2025-26, compared to a record Rs 2.62 lakh crore for FY 2024-25 in the interim budget. The lower allocation, along with the lack of major reforms for the railway sector, caused railway stocks to tumble shortly after the Budget announcement.
This led to a broad sell-off in railway-linked stocks on Saturday, with the losses continuing into Monday. Rail Vikas Nigam (RVNL) fell 6.5%, Texmaco dropped 4.3%, IRFC declined 4.6%, and Titagarh Rail saw a 7% decrease.
The Budget also revealed a modest increase in the overall government capex, rising from Rs 11.11 lakh crore last fiscal year to Rs 11.2 lakh crore—much lower than expected—further dampening sentiment in infrastructure stocks.
Analysts observed that the Budget struck a balance between promoting consumption via personal income tax cuts and moderating capital expenditure, with fiscal prudence taking precedence over growth. This cautious stance left investors concerned about the short-term growth potential of the railway sector.
Additionally, the government maintained the railway capex at Rs 2.52 lakh crore for FY26, disappointing analysts who had hoped for a significant increase to support infrastructure development, modernize freight corridors, and improve passenger safety. The unchanged allocation contributed to the negative market reaction.
Over the past decade, Indian Railways has made significant progress in infrastructure development, commissioning 31,180 track kilometers between 2014 and 2024. The pace of track-laying increased from 4 km/day in FY15 to 14.54 km/day in FY24. Electrification also advanced rapidly, with 41,655 route kilometers electrified since 2014—almost double the previous total.
Despite these achievements, the sector still relies heavily on government funding for capital-intensive projects. While Indian Railways generates revenue from freight and passenger services, it struggles to cover large-scale capital expenditures and often depends on additional budgetary resources and government grants.
In the interim budget, additional funds were allocated to support industrial development. The railway ministry stated that these funds would aid in developing infrastructure at key industrial clusters, including Kopparthy on the Vishakhapatnam-Chennai Industrial Corridor, Orvakal on the Hyderabad-Bengaluru Industrial Corridor in Andhra Pradesh, and Gaya on the Amritsar-Kolkata Industrial Corridor in Bihar.
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