Shares of IRFC have been trading around its record high levels. Indian Railway Finance Corporation is a dedicated market borrowing arm of the Indian Railways.

Most of rail PSU stocks have been trading at relatively cheaper valuations, clean balance sheets and attractive dividend yields for a long time.

The stocks IRFC and RVNL may touch the target of 42 and 90 levels respectively till the budget,” said said Ravi Singh, Vice President and Head of Research, Share India.

“Investors are now beginning to realise the implications of the government’s massive capex spending of which the railways is the biggest beneficiary. The government is increasing its capex and at 19%, the railways have the highest share of spending,” points out smallcase manager Abhishek Basumallick of Intelsense Capital.

Indian Railways related stocks have been surging in the past few months with shares like Indian Railway Finance Corporation Ltd (IRFC) generating over 51% and Rail Vikas Nigam Ltd (RVNL) delivering 96% returns in the last month. Meanwhile Ircon International shares have also surged over 30% during the last month

A bulk of the money spent is being invested in modernising and electrification of railway lines and tracks. Besides allocating over Rs 19,000 crore for various Metro projects across India, Finance Minister Nirmala Sitharaman had also announced 400 new ‘Vande Bharat’ trains.

“Stocks in India go up for two reasons – growth or the expectation of growth. Here it is because of the second factor. Railways will benefit as long as the capex boom is there,” the market expert said, adding that the cycle may last 3-4 years ahead of the 2024 Lok Sabha elections.

Domestic brokerage and research firm Anand Rathi has picked Texrail stock is its top pick for the month amid witnessing huge traction on all the railway related stocks.

“TEXRAIL has been consolidating for quite some time and recently we witnessed a fresh range breakout in the stock. We expect the stock to catch up its peers in the coming weeks. Thus, we advise traders to buy the stock near Rs 63.50 with a stop loss of Rs 57 for upside target of Rs 75,” the brokerage said.