Edelweiss Financial Services Ltd Upgraded to Hold by MarketsMOJO on Technical Improvement

Technical Trend Shift Spurs Upgrade

The primary catalyst for the upgrade was a marked improvement in Edelweiss’s technical grade, which transitioned from mildly bearish to mildly bullish. This shift is evident across several key technical indicators. On a weekly basis, the Moving Average Convergence Divergence (MACD) remains mildly bearish, but daily moving averages have turned mildly bullish, signalling a potential short-term upward momentum. The Relative Strength Index (RSI) on both weekly and monthly charts remains neutral, indicating no overbought or oversold conditions.

Bollinger Bands suggest a mildly bearish stance weekly but sideways movement monthly, reflecting a consolidation phase rather than a clear downtrend. The KST (Know Sure Thing) indicator remains bearish weekly and mildly bearish monthly, but the Dow Theory readings have improved to mildly bullish weekly, with no clear monthly trend. Additionally, On-Balance Volume (OBV) shows mild bullishness weekly, suggesting accumulation by investors.

These mixed but improving technical signals contributed significantly to the revised Mojo Score of 50.0 and the upgrade to a Hold rating from the previous Sell grade. The stock’s price action supports this view, with a day change of +2.89% and a current price of ₹106.95, up from the previous close of ₹103.95. The stock’s 52-week range remains wide, between ₹73.51 and ₹123.50, indicating room for recovery and growth.

Valuation Remains Attractive Amidst Sector Peers

Despite recent financial challenges, Edelweiss Financial Services maintains an attractive valuation profile. The company’s Price to Book Value stands at 2.3, which is considered fair relative to its peers in the finance and NBFC sector. This valuation is supported by a Return on Equity (ROE) of 9.6%, signalling efficient capital utilisation compared to industry averages.

The stock’s market capitalisation grade is rated 3, reflecting a mid-sized presence in the holding company sector. While the stock’s one-year return of 0.38% lags behind the Sensex’s 8.49% gain, its longer-term performance is impressive. Over three, five, and ten-year periods, Edelweiss has delivered returns of 176.85%, 156.25%, and 247.32% respectively, significantly outperforming the Sensex’s corresponding returns of 37.63%, 66.63%, and 245.70%. This long-term outperformance supports the view that the current valuation is justified and offers potential upside.

Financial Trend: Mixed Signals from Recent Results

While the long-term fundamentals remain robust, recent quarterly financial results have been disappointing. For Q2 FY25-26, Edelweiss reported net sales of ₹1,860.87 crores, a sharp decline of 33.43% year-on-year. Profit Before Tax (excluding other income) plunged by 131.26% to a loss of ₹85.17 crores. Additionally, cash and cash equivalents at the half-year mark fell to ₹3,179.69 crores, the lowest level in recent periods.

These negative short-term trends have weighed on investor sentiment and contributed to the stock’s underperformance over the past month (-6.10%) and year-to-date (-1.11%). However, the company’s operating profits have grown at a compound annual growth rate (CAGR) of 17.58% over the long term, indicating underlying strength in core operations despite recent volatility.

Net sales growth remains a concern, with a negative annual growth rate of -1.07%, highlighting challenges in top-line expansion. This mixed financial picture justifies a cautious Hold rating rather than a more optimistic Buy, as the company works to stabilise its revenue and profitability trajectory.

Institutional Confidence and Market Position

Institutional investors hold a significant 24.13% stake in Edelweiss Financial Services, reflecting confidence from well-resourced market participants who typically conduct thorough fundamental analysis. This institutional backing provides a degree of stability and suggests that the company’s long-term prospects are viewed favourably by knowledgeable investors.

The company operates within the holding company sector, which often entails diversified business interests and exposure to multiple financial services verticals. This diversification can provide resilience against sector-specific downturns but also requires careful management to sustain growth and profitability.

Comparative Performance Against Sensex

When benchmarked against the Sensex, Edelweiss’s stock returns show a mixed picture. The stock outperformed the Sensex over the past week, gaining 3.78% compared to the Sensex’s 2.30%. However, over the last month, the stock declined by 6.10%, underperforming the Sensex’s 2.36% loss. Year-to-date, the stock’s return of -1.11% slightly trails the Sensex’s -1.74%.

Longer-term returns are more favourable, with Edelweiss delivering 176.85% over three years versus the Sensex’s 37.63%, and 156.25% over five years compared to the Sensex’s 66.63%. Over a decade, the stock’s 247.32% return closely matches the Sensex’s 245.70%, underscoring its capacity for sustained wealth creation despite recent headwinds.

Outlook and Investment Considerations

The upgrade to a Hold rating reflects a balanced assessment of Edelweiss Financial Services Ltd’s current position. The improved technical indicators suggest a potential stabilisation or modest recovery in the near term, while the valuation remains reasonable relative to sector peers. Long-term fundamentals, including a strong operating profit CAGR and institutional support, provide a foundation for future growth.

However, investors should remain cautious given the recent negative quarterly results and declining net sales. The company’s ability to reverse these trends and sustain profitability will be critical to any further upgrades in rating. For now, the Hold rating signals that the stock is fairly valued with limited downside risk but also lacks the momentum for a strong Buy recommendation.

Summary of Ratings and Scores

Edelweiss Financial Services Ltd’s current Mojo Score stands at 50.0, with a Mojo Grade of Hold, upgraded from Sell on 3 February 2026. The market cap grade is 3, reflecting its mid-tier size within the holding company sector. Technical grades have improved notably, driving the rating change, while valuation and financial trends present a mixed but cautiously optimistic picture.

Investors seeking exposure to the finance and NBFC sector may consider Edelweiss as a stable holding with long-term growth potential, but should monitor upcoming quarterly results closely for signs of financial recovery.

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