The Indian Railways have experienced substantial changes over the past decade (2014-2024). This is due to a strong emphasis on doubling railway tracks to enhance efficiency, alleviate congestion, and facilitate smoother traffic flow, potentially leading to quicker journey times. Furthermore, the introduction of modern trains such as the Vande Bharat Express has elevated travel comfort and speed to new heights. These trains feature superior amenities and accelerated speeds.
Historically dominated by government-owned enterprises, the sector is gradually shifting towards privatization, particularly in engineering, ticketing, and other maintenance and operational aspects. The adoption of digital platforms and mobile applications has streamlined ticketing processes, enhancing convenience for passengers in booking tickets and accessing information.
The benefit of investing in railway funds
Increased focus has indeed ushered in significant transformations in the operations of the Indian Railways. As the railway sector continues to advance towards ensuring safer, faster, and more comfortable travel for passengers, it becomes evident to recognize the significance of integrating railway stocks into one’s investment portfolio.
While dedicated railway mutual funds may not exist, investors can explore various PSU funds that allocate a portion of their assets under management (AUM) to railway stocks. Investing in PSU funds that allocate money to railway stocks can significantly enhance the diversity and potential returns of an investment portfolio.
The following table illustrates details of some of the leading mutual funds in India with the highest exposure to railway stocks.
| Name of the fund | Exposure to railway stocks (in %) | 5-year returns (in %) | 10-year returns (in %) |
|
Quant PSU Fund |
13.90 |
– |
– |
|
Quant Momentum Fund |
5.90 |
– |
– |
|
Invesco India PSU Equity Fund |
4.80 |
33.76 |
20.88 |
|
Samco Special Opportunities Fund |
6.07 |
– |
– |
|
HDFC Defence Fund |
5.95 |
– |
– |
| Source: Kuvera.in (As of July 11, 2024) | |||
The upcoming discussions and announcements regarding the Union Budget on July 23 this year could certainly bolster the argument for considering mutual funds focused on railways. The eagerly awaited budget announcements, coupled with the robust stability of the railway sector, present a compelling argument for incorporating railway mutual funds into a diversified portfolio. By leveraging professional management and the diversification inherent in mutual funds, investors can capitalize on growth opportunities while managing risks effectively.
Why invest in railway-focused PSU funds?
Railway-oriented PSU funds offer concentrated exposure to the rail industry by investing primarily in businesses that are directly involved in railway operations and infrastructure. Moreover, PSUs typically align with governmental objectives. The prospects of these businesses could be positively impacted by recent budget announcements on railway development, which could result in improved financial performance.
- Growth prospects: It appears from the budget announcements that the railway industry is modernizing and growing, creating new business opportunities.
- Diversification: By distributing your investment across several railway companies, mutual funds reduce risk more than buying individual stocks.
- Expert insight: Mutual fund managers select and conduct in-depth research on railway stocks, providing specialized industry knowledge.
Certainly, investing in mutual funds can be a wealth-building strategy. It’s crucial to ensure that the fund aligns with your risk tolerance and investment objectives. However, it would be prudent to consult a financial advisor before making your next investment decision, particularly those involving equities in the stock market.