Arihant Capital Markets Ltd Upgraded to Sell: A Detailed Analysis of Quality, Valuation, Financial Trend, and Technicals

Technical Trends Show Signs of Stabilisation

The primary catalyst for the upgrade stems from a notable change in the technical outlook. The technical grade for Arihant Capital has improved from a bearish stance to mildly bearish, signalling a potential bottoming out in price momentum. Key technical indicators present a mixed but cautiously optimistic picture. The Moving Average Convergence Divergence (MACD) remains bearish on a weekly basis but has softened to mildly bearish on the monthly chart. Similarly, Bollinger Bands and the daily moving averages indicate a mildly bearish trend, suggesting reduced downside pressure compared to previous months.

Other momentum indicators such as the KST (Know Sure Thing) oscillate between bearish weekly and mildly bearish monthly readings, while the Dow Theory presents a mildly bullish weekly signal. On balance, the On-Balance Volume (OBV) metric has turned mildly bullish on both weekly and monthly timeframes, hinting at accumulation by investors despite recent volatility.

These technical nuances have contributed to a more constructive market sentiment, reflected in the stock’s recent price action. The share price closed at ₹85.13 on 24 Feb 2026, up 1.04% from the previous close of ₹84.25, with intraday highs touching ₹87.26. This marks a recovery from the 52-week low of ₹56.31, although still well below the 52-week high of ₹120.35.

Valuation Metrics Reflect Improved Attractiveness

Alongside technical improvements, Arihant Capital’s valuation grade has been upgraded from very attractive to attractive. The company currently trades at a price-to-earnings (PE) ratio of 23.04, which, while higher than some peers, remains reasonable given its sector and growth prospects. The price-to-book (P/B) ratio stands at 2.15, indicating a moderate premium over book value but still below levels seen in more expensive competitors.

Enterprise value multiples further support this assessment, with EV/EBIT at 9.57 and EV/EBITDA at 9.13, suggesting the stock is fairly valued relative to earnings before interest, taxes, depreciation and amortisation. The EV to capital employed ratio of 3.37 and EV to sales of 3.33 also point to a balanced valuation framework. Notably, the company’s return on capital employed (ROCE) is a robust 36.64%, while return on equity (ROE) is 10.43%, underscoring efficient capital utilisation despite recent earnings pressures.

Compared to peers such as Mufin Green and Ashika Credit, which are classified as very expensive with PE ratios exceeding 100 and 170 respectively, Arihant Capital’s valuation appears more compelling. This relative attractiveness has been a key factor in the rating upgrade, signalling potential upside if earnings recover.

Financial Trend Remains Challenging Amid Earnings Decline

Despite the positive shifts in technical and valuation parameters, Arihant Capital’s financial trend continues to weigh on sentiment. The company has reported negative financial performance for five consecutive quarters, with the latest quarter’s profit after tax (PAT) falling sharply by 52.1% to ₹5.18 crores compared to the previous four-quarter average. Net sales for the nine months ended December 2025 declined by 21.98% to ₹156.80 crores, while profit before depreciation, interest and taxes (PBDIT) hit a low of ₹13.93 crores in the most recent quarter.

This persistent earnings contraction has tempered investor enthusiasm, reflected in the company’s modest dividend yield of 0.58%. Furthermore, domestic mutual funds hold no stake in Arihant Capital, a notable absence given their capacity for detailed research and preference for fundamentally sound companies. This lack of institutional interest may indicate caution regarding the company’s near-term prospects.

Nevertheless, the company’s long-term fundamentals remain solid, with an average ROE of 17.29% over recent years and consistent returns that have outperformed the BSE500 index. Over the past five years, Arihant Capital has delivered a remarkable 445.71% return, vastly exceeding the Sensex’s 61.92% gain. Even over the last decade, the stock has generated an extraordinary 1,834.77% return compared to the Sensex’s 256.13%, underscoring its potential as a long-term wealth creator.

Quality Assessment and Market Position

In terms of quality, Arihant Capital’s Mojo Score stands at 34.0, with a Mojo Grade of Sell, upgraded from Strong Sell on 24 Feb 2026. This score reflects a cautious stance given the company’s recent financial setbacks but acknowledges the stabilising technical outlook and improved valuation. The company operates within the capital markets sector, a highly competitive and cyclical industry that demands strong risk management and operational efficiency.

While the company’s market capitalisation grade is 4, indicating a mid-sized entity, its stock price has shown resilience with a one-week return of 12.19%, significantly outperforming the Sensex’s negative 1.47% over the same period. The one-month return is similarly strong at 12.21%, compared to the Sensex’s 0.84%. However, year-to-date returns remain negative at -5.31%, slightly worse than the Sensex’s -3.51%, reflecting ongoing volatility.

Investor Takeaway: Balancing Risks and Opportunities

The upgrade of Arihant Capital Markets Ltd’s rating to Sell from Strong Sell reflects a more balanced view of the company’s prospects. Improved technical indicators suggest that the stock may have found a floor, while valuation metrics indicate it is trading at an attractive level relative to peers and historical norms. However, the persistent decline in quarterly earnings and lack of institutional backing remain significant concerns.

Investors should weigh the company’s strong long-term track record and capital efficiency against the near-term financial headwinds. The stock’s recent outperformance relative to the Sensex and BSE500 indices over multiple time horizons highlights its potential for recovery, but caution is warranted given the ongoing earnings volatility.

In summary, Arihant Capital’s revised rating signals a cautious optimism, recognising technical and valuation improvements while acknowledging the need for a turnaround in financial performance to justify a more positive outlook.

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