Angel One Ltd Downgraded to Sell Amid Weak Financials and Technical Signals

Quality Assessment: Long-Term Strengths Amid Recent Weakness

Despite the downgrade, Angel One continues to demonstrate robust long-term fundamental quality. The company boasts an average Return on Equity (ROE) of 30.19%, underscoring its ability to generate strong shareholder returns over time. Additionally, its net sales have grown at an annualised rate of 38.34%, while operating profit has expanded by 37.53% annually, reflecting solid operational efficiency and growth potential.

However, recent quarterly results have cast a shadow over this otherwise strong quality profile. The company has reported negative financial performance for three consecutive quarters, with the latest nine-month period (Q2 FY25-26) showing a 52.59% decline in Profit After Tax (PAT) to ₹500.72 crores. Net sales have also contracted by 20.55% to ₹3,398.30 crores, and Profit Before Tax excluding other income (PBT less OI) fell by 13.8% to ₹291.56 crores compared to the previous four-quarter average. These figures indicate a significant slowdown in core business momentum, raising concerns about near-term earnings sustainability.

Valuation: Fair but Under Pressure

Angel One’s valuation remains relatively fair, with a Price to Book Value (P/BV) ratio of 3.7 and a Return on Equity of 13.5% in the latest assessment. While these metrics suggest the stock is not excessively overvalued, the recent decline in profitability—profits have fallen by 40.6% over the past year—has exerted downward pressure on investor sentiment. The stock’s current market capitalisation grade stands at 3, reflecting a mid-tier valuation status within its sector.

Moreover, the stock price has underperformed significantly relative to the broader market. Over the last year, Angel One’s share price has declined by 19.10%, while the BSE500 index has gained 5.56%. This underperformance highlights the market’s cautious stance on the company’s near-term prospects despite its long-term fundamentals.

Financial Trend: Consecutive Quarterly Declines Signal Caution

The financial trend for Angel One has deteriorated markedly in recent quarters. The company’s negative results over the last three quarters have been a key driver behind the downgrade. The 9-month PAT decline of 52.59% and net sales contraction of 20.55% are particularly concerning, indicating that the company is struggling to maintain its growth trajectory amid a challenging macroeconomic environment.

Profitability metrics have also weakened, with PBT less other income falling by 13.8% compared to the previous four-quarter average. This trend suggests that operational pressures are mounting, potentially from increased costs or subdued market activity in the capital markets sector. Investors should note that such a sustained negative financial trend often precedes further price corrections unless there is a clear turnaround strategy.

Technical Analysis: Shift from Mildly Bullish to Sideways and Bearish Signals

The technical outlook for Angel One has shifted unfavourably, contributing significantly to the downgrade. The technical grade has changed from mildly bullish to sideways, reflecting a loss of upward momentum in the stock price. Key technical indicators paint a mixed but predominantly bearish picture:

• MACD readings are bearish on the weekly chart and mildly bearish on the monthly chart, indicating weakening momentum.


• Relative Strength Index (RSI) shows no clear signal on both weekly and monthly timeframes, suggesting indecision among traders.


• Bollinger Bands are bearish on both weekly and monthly charts, signalling increased volatility and downward pressure.


• Moving averages on the daily chart remain mildly bullish, but this is insufficient to offset the broader negative signals.


• KST indicator is bullish weekly but mildly bearish monthly, reflecting short-term strength overshadowed by longer-term weakness.


• Dow Theory readings are mildly bearish weekly but mildly bullish monthly, indicating conflicting trends across time horizons.


• On-Balance Volume (OBV) is mildly bearish weekly but bullish monthly, suggesting volume trends are mixed but not decisively positive.

Overall, the technical indicators suggest that the stock is struggling to sustain a clear upward trend and is more likely to trade sideways or face further declines in the near term. This technical deterioration has been a pivotal factor in the MarketsMOJO downgrade to a Sell rating, with the current Mojo Score standing at 44.0.

Promoter Confidence and Market Performance

Another critical factor influencing the downgrade is the reduction in promoter stake. Promoters have decreased their holding by 6.58% over the previous quarter, now owning 28.97% of the company. Such a significant reduction often signals diminished confidence in the company’s near-term prospects, which can weigh heavily on investor sentiment.

From a market performance perspective, Angel One has underperformed its benchmark indices substantially. While the Sensex has delivered a year-to-date return of 8.36% and a one-year return of 8.21%, Angel One’s stock has declined by 19.18% YTD and 19.10% over one year. This stark contrast highlights the stock’s vulnerability and the challenges it faces in regaining investor favour.

Long-Term Performance Context

Despite recent setbacks, Angel One’s long-term performance remains impressive. Over a five-year horizon, the stock has delivered a remarkable 613.07% return, significantly outperforming the Sensex’s 77.34% gain. Over three years, the stock’s return of 80.7% also surpasses the Sensex’s 39.17%. These figures underscore the company’s ability to generate substantial wealth for patient investors over extended periods.

However, the absence of 10-year stock return data and the recent negative trends highlight the importance of cautious optimism. Investors should weigh the company’s strong historical growth against current headwinds before making investment decisions.

Conclusion: A Cautious Stance Recommended

Angel One Ltd’s downgrade from Hold to Sell by MarketsMOJO reflects a comprehensive reassessment of its quality, valuation, financial trend, and technical outlook. While the company retains strong long-term fundamentals and an impressive historical growth record, recent quarters have seen significant financial deterioration, weakening technical signals, and reduced promoter confidence. The stock’s underperformance relative to the broader market further compounds concerns.

Investors should approach Angel One with caution, recognising that the current environment presents considerable risks. The downgrade serves as a warning that the stock may face continued volatility and downside pressure in the near term, despite its underlying strengths. Monitoring upcoming quarterly results and technical developments will be crucial for reassessing the stock’s outlook going forward.

Only Rs. 9,999 - Get MojoOne + Stock of the Week for 1 Year (MRP = Rs. 34,999) Start Today