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Budget blues: rail stocks derailed

Railway-linked stocks witnessed a steep fall of 14% after the announcement of the railway budget on Friday. The budget failed to lift sentiments, as concerns over land acquisition and financial challenges plaguing power plants and wagon projects persisted.

business Updated: Feb 25, 2011 23:07 IST
HT Correspondent

Railway-linked stocks witnessed a steep fall of 14% after the announcement of the railway budget on Friday. The budget failed to lift sentiments, as concerns over land acquisition and financial challenges plaguing power plants and wagon projects persisted.

Shares of Kalindi Rail Nirman and Titagarh Wagons fell by 13.7 and 13.1% respectively. Kernex Microsystems that is into the business of developing railway safety and signal systems fell by 5% during the day, while BEML fell by 2.9%.

“The railway budget sounds ambitious to state the least but given the track record, especially of last year, implementation seems unlikely again. For instance, the minister targets 700km of rail line addition in 2011-12 compared to 180km average. Even last year the aim was for 1,000 km, which missed the target by a wide margin,” said Amar Ambani, head of research, Indian Infoline.

While, railways minister Mamata Banerjee announced several projects, experts raised concerns on the delivery aspect.

“There is ample scope to speculate the outcome of her ambitious plans. More importantly because the budget is silent on the real progress of large projects announced earlier such as the dedicated freight corridor and has not put in place any concrete proposal to finance and implement these projects,” said Vishwas Udgirkar, senior director, Deloitte India (Transport).

Experts said that power plant and wagon manufacturing projects face challenges in terms of land acquisition and financing and for projects announced in smaller towns, material sourcing remains a major constraint.