RVNL shares gained for the second day as easing inflation boosts outlook for railway capex. Technical signals support a bullish move.

Railway stocks extended gains for the second time this week, with Rail Vikas Nigam Limited (RVNL) rallying over 10% on Friday, defying weakness in the broader market. 

The surge comes amid renewed bullish sentiment and improving macroeconomic tailwinds.

SEBI-registered analyst Navodit Tiwari sees this as a turning point for RVNL after a prolonged correction. 

Previously, he had initiated a short position near the all-time high around ₹570, which proved to be a timely exit as the stock subsequently declined to a 52-week low of ₹303. 

Now, with the broader economic environment turning favorable, Tiwari points to India’s Consumer Price Index (CPI) print for April 2025 at 3.16%, the lowest since July 2019, and food inflation at just 1.78%. 

This decline in inflation is expected to provide the government with greater fiscal flexibility, potentially leading to increased budgetary allocations and more order wins for capital goods and railway companies like RVNL.

From a fundamental perspective, Tiwari acknowledges that while RVNL is still trading at a high price-to-earnings ratio of 69, this valuation is justified by the ongoing expansion of India’s railway infrastructure. 

The past three quarters saw muted performance due to a slowdown in government capital expenditure amid rising inflation, but with inflation now easing, the outlook for the next two quarters becomes crucial for the company’s performance.

Technically, RVNL has broken above its previous support zone, which had turned into resistance, signaling renewed strength. 

The Relative Strength Index (RSI) also appears robust, supporting the bullish case. 

With the current market price at ₹410, Tiwari sets upside targets at ₹480/₹490 and ₹520/₹540, while recommending a stop loss at ₹300, indicating a bullish stance on the stock in the near term.

Data on Stocktwits shows that retail sentiment shifted to ‘bullish’ this week, reinforcing the optimistic outlook. 

RVNL sentiment and message volume on May 16 as of 12:30 pm IST. | source: Stocktwits

RVNL shares fell 2% year-to-date (YTD).

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