Brady Yarosh

Indian share markets are roaring at all-time high levels today.

The Midcap and SmallCap indices are catching up with the ongoing bullish momentum.

In the Midcap and SmallCap space, sector specific momentum is where the money is right now.

The public sector units (PSU) are currently the best-performing sector. The rally started with PSU Banks and the fire is spreading to other PSUs.

I recently wrote about why PSU stocks are rising and what lies ahead.

But now...it's time for railway stocks.

Stocks involved in the railway segment have been the talk of the town for the last few weeks.

In the previous month, a few railway stocks witnessed a staggering rally of over 50% while others are still only delivered marginal gains.

Co-head of Research at Equitymaster and my colleague Rahul Shah recently explained why railway stocks are going up.

Here's an excerpt from his editorial...

You can read the entire editorial here.

In the performance table above, Rail Vilas Nigam (RVNL) leads the table with 97% in one month and 148% in the last six months.

The leader of the sector, Indian Railway Catering and Tourism Corporation (IRCTC) has been quiet in terms of stock price performance.

The question now remains whether the rally will continue in railway stocks?

Unlike other sectorial indices, we don't have Railway Index to analyse the trend and predict its momentum.

So we created the Marketcap Weighted Railway Index (MWRI) to analyse the trend.

Considering the marketcap of each stock, the weights are assigned to create the index.

With a marketcap of Rs 580 bn, IRCTC leads the weightage with 42% followed by IRFC with a marketcap of Rs 450 bn, weighing 33%.

On the daily chart above, the Marketcap Weighted Railway Index (MWRI) is trending bullish since the low of June 2022.

After the death cross in May 2022, the index was trending bearish, in sync with the market sentiments.

With the reversal in the benchmark indices, railway stocks also witnessed a reversal, in sync with broader market.

The golden cross - a bullish crossover of the short-term moving average (50 days) over the long-term moving average (200 days) - is visible on the chart, confirming the reversal.

It highlights the current rally is just the beginning of a new trend in railway stocks.

With the golden cross bullish pattern, the breakout and the re-test of the consolidation is visible on the chart.

After the rally, between July 2022 to September 2022, the index took a breather and broke out in the start of November.

The breakout, re-test, and resumption in the bullish trend, indicates the bulls have the upper hand.

As Rail Vikas Nigam Ltd (RVNL) leads the performance table, does it still have room to go higher?

Let's analyse the price chart of RVNL.

The stock broke out of the accumulation zone in the form of a horizontal trendline at Rs 26 and headed to Rs 40.

The re-accumulation phase, from the start of 2021 to November 2022, paid off for patient investors as the stock has delivered multibagger returns.

Bulls are grabbing the opportunity at the breakout as volumes in the lower panel signal participation in the rally.

The higher volume on the breakout is a sign of a bullish scenario.

Indian Railway Finance Corporation Ltd has been an underperformer since its listing in January 2021 at Rs 25-26.

Patient investors who got allotment in the IPO will be happy now as the stock is trading at Rs 34.

The stock broke out of the consolidation as per the Fibonacci Time Cycle theory of 89 weeks.

Such was the case with IRCTC too in June 2021 when it was trading at Rs 400. The stock went to touch a high of Rs 1,273.

Can IRFC repeat the IRCTC rally? Only time will tell.

Similar to the RVNL and IRFC, Rites share price broke out of the consolidation zone with higher volumes.

The consolidation of around 30 months and the breakout with volumes is likely to last longer and the rally may prolong towards the higher levels.

This is yet another stock from the basket witnessing a rally, consolidation, and breakout, leading the way northwards.

The uptick in volumes across the railway stocks highlights the eagerness of investors to accumulate these stocks and grab this opportunity.

If you're interested in being part of my charting journey as I share how to create wealth from the profitable trade setups, join my telegram channel - Fast Profits Daily. You'll get access to the best trading ideas in the stock market.

Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such. Learn more about our recommendation services here...

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