5 Railway Stocks in Focus Ahead of the Union Budget 2026

Railway stocks are back in conversation as the Union Budget 2026 nears. Investors are not just excited about pre-Budget positioning but from a subtle and important shift in how the railways are trying to fix their finances.

The rail fare hike, introduced by Indian Railways on December 26, 2025, is being seen as a move towards better revenue discipline. Investors are hoping that this could help improve internal cash flows and offer budgetary support over time to the system.

Additionally, investor expectations from Union Budget 2026 remain high. The focus is likely to stay on safety upgrades, modernization and capacity expansion. This includes systems like Kavach, new Vande Bharat sleeper trains and dedicated freight corridors.

Hence, several railway-linked names are being closely tracked.

We highlight five such names that will stay in focus ahead of the Union Budget 2026.

#1 IRCTC

First on our list is IRCTC.

IRCTC sits quietly at the intersection of travel, consumption and scale. It operates across internet ticketing, catering, packaged drinking water and tourism services for the railways. The model is largely asset light. As passenger volumes rise, operating leverage does the heavy lifting. A diversified business mix also helps smooth earnings when one segment slows.

Railway-linked stocks are back in focus ahead of the Union Budget. IRCTC matters in this discussion because it plays a direct role in non-fare revenue generation for the railways. The recent fare hike has again highlighted the scope for better monetisation, whether through ticketing convenience fees or onboard services where demand is steady and predictable.

The numbers from Q2 FY26 reflect this steady grind. Revenue grew 7.7% year-on-year. EBITDA margin stood at 35.3%, slightly higher than last year. The stability in margins did not come from price hikes. It came from tighter cost control, a higher contribution from digital ticketing and an improvement in non-convenience fee income, which management has been consciously pushing.

Internet ticketing continues to be the most profitable segment, aided by efficiency gains as volumes scaled. Tourism, which tends to be cyclical, saw a sharp turnaround at the EBITDA level, helped by better cost discipline and a cleaner business mix. Catering margins, however, remained stable.

Looking ahead, the company is focusing on deepening the digital moat. The company plans to scale its digital platforms, roll out a unified travel portal and build out the payment aggregation business. Capacity additions in Rail Neer are also on the agenda. These investments are expected to be funded through internal accruals.

At current levels, IRCTC trades at a price-to-earnings multiple of 39, at a discount to its long-term median P/E of 64.2.

To know more about the company, check out its financial factsheet and latest quarterly results.

#2 RITES

Next on the list is RITES.

RITES operates as a transport infrastructure consultancy with exposure to railways, highways, ports and urban infrastructure. The company earns most of its revenues from consultancy and project management. This is supported by selective exposure to turnkey execution, exports and leasing.

RITES fits into the hype over railway stocks through its role in planning and designing support for railway and transport infrastructure projects. This is because expectations of higher spending on safety, freight corridors and network expansion keep consultancy-led railway plays relevant.

RITES' Q2 FY26 revenue grew 1.5% year-on-year, despite a decline in turnkey project execution. EBITDA margin improved to 24.4%, aided by a better segmental mix. Management explained that higher contributions from consultancy and exports helped offset the slowdown in turnkey, which typically carries lower margins. Consultancy revenues grew at a double-digit rate, while exports resumed after a long gap with locomotive deliveries during the quarter.

Consultancy was the most profitable segment, thanks to stable margins of around 30%. Export margins settled in the low double digits, while turnkey margins were muted. Leasing also continued to contribute steadily, supported by an expanding locomotive fleet.

Looking ahead, the management expects a gradual pickup in turnkey revenues as the order book starts contributing from late FY26 into FY27. Consultancy and exports are expected to remain the key margin drivers. The company continues to operate with low capex requirements. Any funding needs are to be met entirely through internal accruals.

At current levels, the stock trades at a price-to-earnings multiple of 28, a premium to its long-term median P/E.

To know more about the company, check out its financial factsheet and latest quarterly results.

#3 Texmaco Rail & Engineering

Third on our list is Texmaco Rail & Engineering.

Texmaco Rail & Engineering operates across freight wagons, rail infrastructure, electrical systems and castings.

The company benefits directly from railway spending on freight mobility, electrification and safety systems, areas that continue to receive policy attention.

Texmaco's Q2 FY26 was shaped more by supply-side issues than demand. Thus, revenue declined 6.5% year-on-year, largely due to a temporary shortage of wagon wheelsets at the start of the quarter and weaker export volumes in the foundry business following US tariff disruptions. Texmaco's EBITDA margin came in at 10.5%, a marginally better than the previous quarter. This was driven by higher production efficiency and a steady contribution from the core freight wagon segment as supply constraints eased during the quarter.

Looking ahead, Texmaco aims to execute its existing order book and improve its business mix. The management expects production to stabilize as supply bottlenecks fade.

Any more capex spends in the future will go towards foundry expansion, technology upgrades and new product lines. These investments are expected to be funded largely through internal accruals, with no aggressive reliance on fresh borrowing.

At present, the stock trades at a PE of 25 times, a discount to its long-term median valuation.

To know more about the company, check out its financial factsheet and latest quarterly results.

#4 Rail Vikas Nigam Limited

Fourth on our list is Rail Vikas Nigam.

Rail Vikas Nigam works as the execution arm for railway and transport infrastructure projects. Its work spans civil works, electrification, signalling and metro rail. Over time, the company has moved beyond legacy railway projects to competitively bid on projects across sectors.

RVNL sits at the heart of railway-linked stocks. The company is directly exposed to spending on rail expansion, safety upgrades and network modernisation, areas that continue to receive policy attention.

The company's Q2 FY26 results improved over the previous quarter after a slow monsoon-led start to the year. Margins, however, remained under pressure as a larger share of revenues came from competitively bid projects. These typically carry lower margins than legacy railway contracts.

The margins were lower mainly because of the business mix, as bidding projects are now a higher share of overall turnover. As these projects get executed and scope-change claims settle, margins should normalise.

The order book offers decent revenue visibility for the next few years. It includes a balanced mix across railways, metros, roads, signalling and manufacturing-linked projects such as Vande Bharat.

Looking ahead, RVNL plans to focus on bidding and executing its orderbook faster. The company's capex requirements remain modest, given the project-management-heavy nature of the business. Any of the company's funding needs are to be met largely through internal cash flows, keeping the balance sheet light.

At present, the stock trades at a PE of 71 times, a premium to its long-term median valuation.

To know more about the company, check out its financial factsheet and latest quarterly results.

#5 Indian Railway Finance Corporation

Last on our list is Indian Railway Finance Corporation.

Indian Railway Finance Corporation is the dedicated financing arm for the railways. Its role is to fund rolling stock and infrastructure assets through long-term leases, largely backed by the railways and allied government entities. The business model is simple and predictable and is built around cost-plus arrangements.

Railway-linked stocks are back in focus ahead of the Union Budget, and the company sits close to the centre of this theme. Its growth is closely tied to railway capital expenditure, whether through fresh rolling stock, infrastructure creation or allied ecosystem investments that support rail operations.

The company's Q2 FY26 net interest margin improved to 1.55%. This was supported by gradual diversification beyond traditional railway leasing. The newer lending to power, renewables and infrastructure-linked entities within the government ecosystem is coming at higher spreads than legacy assets. This is helping with margin expansion without increasing risk. The asset mix is conservative, as more than 98% of assets are still linked to the railways and allied government entities. This keeps credit risk low.

IRFC's operating costs remain negligible, protecting margins even as the balance sheet expands. Going forward, the company plans to deepen diversification while staying within the broader railway and government infrastructure ecosystem. It's focus areas include renewable energy, power transmission, rolling stock leasing to non-railway entities and funding railway infrastructure through joint ventures.

At present, the stock trades at a P/BV of 3, a premium to its long-term median valuation.

To know more about the company, check out its financial factsheet and latest quarterly results.

Conclusion

In the railway space, valuations are no longer uniformly cheap. The Nifty Railways PSU index trades at a price-to-earnings multiple of around 26. This masks a wide gap between stocks that still offer value and those where optimism is already priced in.

That makes a top-down bet risky.

What matters now is a bottom-up approach, focussing on companies with a steady track record, sensible balance sheets and valuations that leave room for delivery.

This caution is well placed. Several railway-linked stocks already reflect aggressive assumptions, and sentiment-led rallies tend to fade when numbers do not keep pace.

Investors should stay selective. In a space where expectations are high, discipline matters more than excitement.

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