Capital India Finance Ltd Downgraded to Sell Amid Mixed Technicals and Weak Financials

Quality Assessment: Weak Fundamentals Persist

Capital India Finance Ltd operates within the Non Banking Financial Company (NBFC) sector, a space that demands robust financial health and growth prospects. Unfortunately, the company’s recent quarterly results for Q2 FY25-26 reveal a deteriorating financial trend. The operating profit has declined at an annualised rate of -4.77%, signalling contraction rather than expansion. The company reported a net loss at the Profit After Tax (PAT) level of ₹-47.54 crores, a staggering fall of -7890.3% compared to the previous four-quarter average. Net sales also declined by 6.2% to ₹130.84 crores, while PBDIT plunged to ₹-26.99 crores, marking the lowest level in recent quarters.

Return on Equity (ROE) remains negative at -7.5%, underscoring the company’s inability to generate shareholder value. This weak fundamental strength continues to weigh heavily on the company’s quality rating, which remains poor despite the recent upgrade in overall investment grade.

Valuation: Expensive Despite Discount to Peers

Capital India’s valuation metrics present a mixed picture. The stock trades at a Price to Book (P/B) ratio of 2.2, which is considered expensive given the company’s negative profitability and operating losses. However, when compared to its peer group within the NBFC sector, the stock is trading at a discount relative to historical averages. This suggests that while the valuation is high on an absolute basis, the market may be pricing in some of the company’s challenges.

Despite this, the stock’s returns have been underwhelming over the past year, generating a modest 2.18% return while profits have fallen by an alarming -5040%. This disconnect between valuation and earnings performance contributes to the cautious stance on the stock.

Financial Trend: Negative Performance Continues

The financial trend for Capital India remains negative, with operating losses and declining sales marking the recent quarters. The company’s long-term growth outlook is weak, as evidenced by the negative annualised growth rate in operating profit. This trend is a critical factor in the company’s overall rating, which remains in the Sell category despite the upgrade from Strong Sell.

Moreover, the company’s market capitalisation grade stands at a low 3, reflecting its relatively small size and limited market presence. Domestic mutual funds hold no stake in Capital India, which is notable given their capacity for in-depth research and preference for fundamentally sound companies. This absence of institutional interest may indicate a lack of confidence in the company’s prospects at current valuations.

Technical Analysis: Mildly Bullish Shift Spurs Upgrade

The primary driver behind the upgrade from Strong Sell to Sell is a positive shift in technical indicators. The technical trend has moved from sideways to mildly bullish, signalling a potential change in market sentiment towards the stock. Key technical metrics reveal a mixed but improving picture:

• MACD: Weekly readings are bullish, although monthly signals remain mildly bearish.


• RSI: Both weekly and monthly Relative Strength Index readings show no clear signal, indicating a neutral momentum.


• Bollinger Bands: Weekly indicators are mildly bullish, with monthly bands showing a bullish trend, suggesting increased price volatility with upward bias.


• Moving Averages: Daily averages remain mildly bearish, reflecting short-term caution.


• KST (Know Sure Thing): Weekly readings are bullish, while monthly remain mildly bearish, indicating some divergence in momentum across timeframes.


• Dow Theory: Weekly shows no clear trend, but monthly is mildly bullish, supporting the notion of a longer-term positive shift.


• On-Balance Volume (OBV): Weekly readings show no trend, but monthly OBV is bullish, suggesting accumulation over the longer term.

Despite the stock’s current price of ₹37.97, down slightly from the previous close of ₹38.41, the technical signals have improved enough to warrant a less severe rating. The 52-week price range of ₹28.99 to ₹44.50 indicates the stock is trading closer to its lower band, which may attract technical buyers.

Comparative Returns: Mixed Performance Against Sensex

Capital India’s stock returns relative to the Sensex provide further context. Over the past week, the stock declined by 0.58%, outperforming the Sensex’s fall of 1.02%. Over one month, the stock surged 9.90%, significantly outperforming the Sensex’s 1.18% decline. Year-to-date returns stand at 3.15%, lagging behind the Sensex’s 8.39%. Over one year, the stock returned 2.18% compared to the Sensex’s 7.62%. However, over three and five years, Capital India has outperformed the Sensex with returns of 97.04% and 77.43% respectively, closely matching the Sensex’s 77.88% over five years. Remarkably, over a decade, the stock has delivered a staggering 791.31% return, far exceeding the Sensex’s 224.76%.

This long-term outperformance contrasts with recent weak fundamentals, highlighting the importance of monitoring both technical and fundamental factors in investment decisions.

Investment Outlook: Cautious Optimism Amidst Challenges

While the technical upgrade to Sell from Strong Sell reflects a mild improvement in market sentiment, investors should remain cautious given the company’s weak financial performance and expensive valuation relative to earnings. The absence of institutional ownership by domestic mutual funds further underscores the scepticism surrounding Capital India’s near-term prospects.

Investors should weigh the mildly bullish technical signals against the backdrop of operating losses, negative ROE, and declining sales. The stock’s long-term historical returns are impressive, but recent quarters have been challenging, and the company’s fundamentals have yet to show signs of meaningful recovery.

In summary, Capital India Finance Ltd’s rating upgrade is primarily a reflection of improved technical trends rather than a turnaround in financial health or valuation. The company remains a Sell-rated stock with a Mojo Score of 30.0, indicating significant risks persist despite the less severe rating.

Summary of Ratings and Scores

As of 29 Dec 2025, Capital India Finance Ltd holds the following ratings:

• Mojo Grade: Sell (upgraded from Strong Sell)


• Mojo Score: 30.0


• Market Cap Grade: 3 (small-cap)


• Technical Trend: Mildly Bullish


• Financial Trend: Negative


• Valuation: Expensive (P/B 2.2)


• Quality: Weak fundamentals with negative ROE and operating losses

Investors should monitor quarterly results closely for signs of financial improvement before considering a more positive stance.

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