Bajaj Finserv Downgraded to Sell Amid Technical Weakness and Valuation Concerns

Technical Trends Turn Bearish

The primary catalyst for the downgrade lies in the technical analysis of Bajaj Finserv’s stock. The technical grade shifted from sideways to mildly bearish, reflecting a weakening momentum in price action. Key indicators such as the Moving Average Convergence Divergence (MACD) on both weekly and monthly charts have turned mildly bearish, signalling a potential downtrend. The daily moving averages also indicate a mildly bearish stance, reinforcing the short-term negative outlook.

Other technical tools present a mixed picture: while the Bollinger Bands show sideways movement weekly and bullish tendencies monthly, the KST (Know Sure Thing) indicator is bearish on the weekly timeframe but bullish monthly. The Dow Theory shows no clear trend weekly and a mildly bearish trend monthly. Meanwhile, the On-Balance Volume (OBV) indicator remains neutral weekly but bullish monthly, suggesting some underlying buying interest despite price weakness.

Overall, the technical signals suggest a cautious stance, with short-term bearishness outweighing longer-term bullish hints. This technical deterioration has been a significant factor in the downgrade decision.

Valuation Remains Expensive Despite Mixed Returns

Bajaj Finserv’s valuation metrics have also contributed to the downgrade. The stock currently trades at a price-to-book (P/B) ratio of 4.3, which is considered expensive relative to its peers and historical averages. This premium valuation is not fully supported by the company’s recent financial performance, raising concerns about the sustainability of current price levels.

While the company has delivered a 1-year stock return of 8.80%, this lags behind the Sensex’s 10.60% return over the same period. However, over longer horizons, Bajaj Finserv has outperformed the benchmark significantly, with a 5-year return of 104.68% compared to Sensex’s 67.42%, and a remarkable 10-year return of 1169.18% versus 255.80% for the Sensex. This long-term outperformance underscores the company’s strong growth credentials but also highlights the current premium investors are paying.

The Price/Earnings to Growth (PEG) ratio stands at 2.1, indicating that the stock’s price growth is outpacing earnings growth, which may deter value-conscious investors. The Return on Equity (ROE) of 12.7% is respectable but does not fully justify the elevated valuation multiple.

Flat Financial Performance Raises Concerns

Financially, Bajaj Finserv reported flat results in the third quarter of FY25-26, which has disappointed market expectations. The company’s quarterly earnings per share (EPS) dropped to a low of ₹13.96, signalling pressure on profitability. Additionally, the debt-to-equity ratio has risen to a high of 5.13 times as of the half-year mark, indicating increased leverage and potential risk in the capital structure.

Despite these short-term challenges, the company maintains strong long-term fundamentals. Net sales have grown at an annualised rate of 20.59%, while operating profit has expanded at 24.63% annually. The average ROE over the long term remains healthy at 12.74%, reflecting efficient capital utilisation and consistent profitability.

Promoters continue to hold a majority stake, providing stability in ownership and strategic direction. However, the recent flat financial trend and elevated leverage have weighed on investor sentiment, contributing to the downgrade.

Comparative Returns and Market Context

When analysing Bajaj Finserv’s returns relative to the broader market, the stock has shown resilience over multiple timeframes. The 3-year return of 51.91% comfortably outpaces the Sensex’s 39.74%, and the 5-year and 10-year returns are even more impressive. However, the recent 1-week and 1-month returns have been modest, with the stock declining 0.22% over the past week compared to a 0.02% gain in the Sensex, and gaining 5.05% over the past month versus the Sensex’s 2.15%.

This mixed performance reflects the current market uncertainty and the stock’s technical weakness, which have prompted a more cautious rating despite the company’s strong historical growth.

Summary of Ratings and Outlook

MarketsMOJO currently assigns Bajaj Finserv a Mojo Score of 44.0 with a Sell grade, downgraded from Hold on 23 February 2026. The Market Cap Grade remains at 1, reflecting the company’s large size but not necessarily its growth prospects at present. The downgrade is primarily driven by the technical grade change from sideways to mildly bearish, combined with expensive valuation and flat recent financial results.

Investors should weigh the company’s strong long-term fundamentals and historical outperformance against the current technical weakness and valuation concerns. The elevated debt levels and subdued quarterly earnings add to the cautionary tone. While the stock may still appeal to long-term growth investors, near-term risks have increased, justifying the more conservative Sell rating.

At the current price of ₹2,047.00, slightly down 0.53% from the previous close of ₹2,057.95, Bajaj Finserv is trading below its 52-week high of ₹2,194.65 but comfortably above its 52-week low of ₹1,733.15. This price action reflects the mixed signals from the market and the need for investors to carefully monitor upcoming financial results and technical developments.

Investment Considerations

For investors considering Bajaj Finserv, it is crucial to analyse the four key parameters that influenced the rating change:

• Quality: Strong long-term fundamentals with consistent ROE and growth in net sales and operating profit, but recent flat quarterly performance and high leverage raise concerns.
• Valuation: Expensive at a P/B of 4.3 and PEG ratio of 2.1, trading at a premium to peers, which may limit upside potential in the near term.
• Financial Trend: Flat quarterly EPS and rising debt-to-equity ratio indicate some financial stress despite healthy long-term growth rates.
• Technicals: Shift to mildly bearish technical indicators across multiple timeframes signals potential short-term weakness in stock price momentum.

Given these factors, the downgrade to Sell reflects a prudent stance amid evolving market dynamics and company-specific challenges.

Conclusion

Bajaj Finserv Ltd’s recent downgrade from Hold to Sell by MarketsMOJO underscores the importance of integrating technical analysis with fundamental and valuation assessments. While the company boasts strong historical growth and solid long-term fundamentals, the current technical weakness, flat quarterly results, and expensive valuation have tempered enthusiasm. Investors should remain vigilant and consider alternative opportunities within the financial sector that may offer better risk-reward profiles in the current environment.

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