Railway PSU stocks derailed! RVNL, IRFC, IRCON, RITES to IRCTC down 60% in yr- What went wrong? Experts explain

Railway PSU stocks: Top railway public sector undertaking stocks, including Rail Vikas Nigam Limited, Indian Railways Finance Corporation (IRFC), IRCON International, RITES, to Indian Railway Catering and Tourism Corporation (IRCTC), have seen a sharp decline of up to 40% over the past year.

The steep correction has left investors wondering what went wrong and whether the worst is over. Let’s understand from experts, along with their take on railway PSU stocks outlook.

The decline in railway PSU stocks is more of a correction after decades of rally, according to Tushar Badjate, Director of Badjate Stock & shares Pvt Ltd.

"This is a valuation correction first and an earnings correction second. In 2023 and 2024, these stocks were priced for a decade of perfection. IRCTC hit an all-time high of ₹ 1,318 in May 2024 and is now down about 61% from that peak. RVNL and IRFC have fallen between 45% and 53% from their 52-week highs,” added Badjate while highlighting that three things went wrong for these PSU stocks.

Slow growth and decline in margins were among the key things that went wrong for railway PSUs. “What did not break is spending. Railway capex for FY27 is a record ₹ 2.93 lakh crore. The money is flowing. It is just not reaching these companies at the old margins,” highlighted Badjate.

PSU stocks often attract heightened investor interest because of their government-backing, relative stability and long-term growth prospects. The sharp correction in railway PSU stocks is largely a result of investor expectations running ahead of fundamentals, according to Tushar Badjate.

However earnings concerns are real and they are about margins not orders, underlined the expert.

“Order books look healthy . RVNL has ₹ 93,492 crore and RITES has a record ₹ 9,445 crore. The problem is conversion. Only about ₹ 40,000 crore of RVNL's book is actually under execution. Its EBITDA margin is just 4.4%. IRCTC grew revenue 18% last quarter, yet profit was flat as its margin fell to 28.2% from 34.3%. IRCON's consolidated profit dropped to ₹ 92.7 crore from ₹ 164.6 crore on losses from joint ventures. These companies are no longer protected monopolies. They are contractors competing for work. Contractors do not deserve 50 to 60 times earnings,” he added.

The correction has improved valuations for some railway PSU stocks not for all of them in the segment, noted Badjate calling IRFC a safer choice for conservative, income-focused investors.

Over the next 12 months, Nitant Darekar, Research Analyst at Bonanza, expects railway PSUs to ride a sustained capex cycle with Indian Railways' FY27 capital outlay at a record ₹ 2.93 lakh crore.

“RVNL offers the deepest visibility with a Rs. 93,492 crore order book, guidance of about 15% revenue growth and diversification into ports, hydro and overseas work, though thin margins cap upside,” explained Nitant Darekar, Research Analyst at Bonanza.

IRFC stock’s primary trend remains bearish as the ongoing momentum hints at series of lower highs and lower lows from its peak. “Although the RSI at 52.56 indicates a slight neutral recovery attempt, it lacks decisive momentum. This is not a fresh buying opportunity because the stock remains trapped under a heavy bearish structure,” stated Virat Jagad, Sr. Technical Research Analyst at Bonanza.

Downtrend defined by continuous sliding from above 720 to its current level highlights IRCTC’s outlook.

“All key moving averages are aligned in a downward bearish stack, 20 EMA (463.97), 50 EMA (474.05), 100 EMA (494.56), and 200 EMA (539.51), with price consolidating right around the 20 EMA,” highlighted Jagad, while adding caution that it is not a fresh buying opportunity as buying into an ongoing, structurally weak downtrend carries high risk.

Akin to other peers in the category, RVNL also remains locked in a persistent downward trend. The stock is hovering close to its 20 EMA, while it remained firmly suppressed underneath its 50 EMA, 100 EMA and 200 EMA.

“An RSI reading of 47.05 reflects weak neutral momentum with no strong bullish divergence present on the daily chart. This is not a fresh buying opportunity because current price action merely represents a minor relief bounce within a broader drop,” noted Virat Jagad.

RailTel is displaying a strong long-term bearish bias as it declines from above 380 to current levels around 255.40. “The RSI at 45.60 sits below the neutral 50 threshold, highlighting persistent underlying weakness. This is not a fresh buying opportunity due to heavy overhead supply across multiple moving average barriers,” Jagad added.

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