Informist, Monday, Oct 9, 2023
By Padmini Dhruvaraj
MUMBAI – Shares of railway-related companies fell 3-7% today as the attack by Palestinian militant group Hamas on Israel has raised doubts whether the ambitious India-Middle East-Europe Economic Corridor project will take off now. RITES Ltd, Titagarh Rail Systems Ltd, Railtel Corp of India Ltd, Texmaco Rail & Engineering Ltd, Indian Railway Finance Corp Ltd, Rail Vikas Nigam Ltd, and IRCON International Ltd ended the day 2.5-6.0% lower.
"The initial euphoria after the corridor was announced has come down now," said Narendra Solanki, head of equity research at Anand Rathi Share and Stock Brokers. "Apart from this, there is nothing much as these plans take years to materialise," he added.
After the announcement of the economic corridor at the G20 event held in Delhi, shares of the companies mentioned above had risen 2-20% on Sep 11, with those of Rail Vikas Nigam and IRCON International gaining 16% and 20%, respectively.
Implementation of the economic corridor, which was to stretch from India to Europe and pass through West Asia, now looks unlikely in the near future, as Saudi Arabia in the past has often voiced support for the militant group Hamas.
However, Saudi Arabia has called for peace between the two nations. "The Kingdom renews the call of the international community to assume its responsibilities and activate a credible peace process that leads to the two-state solution to achieve security and peace in the region and protect civilians," Saudi Arabia said in a statement on Sunday.
On Saturday, Palestine-based militant group Hamas fired a barrage of rockets on Israel, followed by an unprecedented ground infiltration by the outfit into towns and villages on the border with the Gaza Strip. In retaliation, Israel declared a state of war and launched hundreds of airstrikes targeting Hamas facilities in Gaza.
Israel's Defence Minister Yoav Gallant today announced a "complete siege" of Gaza, including stoppage of food and water supply to the region, Al Jazeera reported.
As the conflict extended into the third day, Brent crude oil jumped up by 4.5% to $88.4 a barrel and dragged global equity markets lower today.
"Investors dumped equity assets as they turned risk off on concerns that a face-off between Israel and Hamas could further deteriorate the global economy already reeling under higher interest rates and stubbornly high inflation," said Shrikant Chouhan, head of research at Kotak Securities Ltd.
Analysts expect the railway stocks to remain under pressure until air over the war between Israel and Palestine clears. "Valuations of these railway stocks were already stretched, and the situation in the Middle East has just created an excuse for a drop," said Vinit Bolinjkar, head of research at Ventura Securities. "These stocks will likely correct a bit more until further developments or earnings," he added.
Most of the railway stocks hit their lifetime highs after the G20 announcement about the economic corridor, which was seen as a competition to China's Belt and Road Initiative. These stocks have given an impressive return so far in 2023, with IRFC, IRCON International, Rail Vikas Nigam, and Titagarh Rail Systems gaining 118-232%.
However, all these stocks are now off their all-time highs. "When there is panic created in the market, retail investors are the first to sell," said Viraj Vyas, market technician and derivatives analyst at Ashika Group. "So normally the stocks held by retailers that are overvalued with not-so-great fundamentals fall," he added.
Shares of Adani Ports and Special Economic Zone, which operates the Haifa port in the north of Israel, ended nearly 5% lower. The stock had risen 7% after the economic corridor project was announced.
"The overall contribution of Haifa in Adani Port's numbers is relatively small at 3% of the total cargo volume. For 2023-24 (Apr-Mar), we have guided for Haifa cargo volumes range of 10-12 mln tn and Adani Ports' total cargo volume guidance of 370-390 mln tn," the company said.
In Apr-Sep, Adani Port's total cargo volume was 203 mln tn, in which the share of the Haifa port was 6 mln tn. End
Edited by Ashish Shirke
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