Garnet International Ltd Upgraded to Sell on Technical Improvement Despite Lingering Fundamental Concerns

Technical Trends Spark Upgrade

The primary catalyst for the rating change was an improvement in the technical grade, which moved from bearish to mildly bearish. Weekly technical indicators such as the Moving Average Convergence Divergence (MACD) and the Know Sure Thing (KST) oscillator have turned mildly bullish, signalling a potential stabilisation in price momentum. Specifically, the weekly MACD shows a mild bullish crossover, while the KST also indicates a slight upward trend on a weekly basis.

However, monthly technicals remain less encouraging, with the MACD and Bollinger Bands still bearish, and the Dow Theory suggesting a mildly bearish trend. The Relative Strength Index (RSI) on both weekly and monthly charts remains neutral, providing no clear directional signal. Daily moving averages continue to show a mildly bearish stance, reflecting short-term caution among traders.

These mixed technical signals suggest that while the stock is no longer in a strongly negative technical phase, it has yet to demonstrate a robust recovery. The upgrade to Sell from Strong Sell reflects this nuanced improvement, acknowledging that the stock may be bottoming out but remains vulnerable to downside risks.

Valuation Remains Attractive but Risky

From a valuation perspective, Garnet International Ltd trades at a Price to Book (P/B) ratio of 2.8, which is considered attractive relative to its peers in the NBFC sector. The company’s Return on Equity (ROE) has improved to 10.3% in the latest period, a significant increase from its long-term average of 4.73%. This improvement in profitability metrics has contributed to a more favourable valuation outlook.

Despite this, the stock price remains depressed, currently at ₹60.55, far below its 52-week high of ₹140.25. The stock has generated a negative return of -50.77% over the past year, underperforming the Sensex, which gained 10.44% over the same period. This divergence highlights the market’s cautious stance on Garnet International’s growth prospects despite improved earnings.

Financial Trend Shows Mixed Signals

Garnet International’s recent quarterly financial performance has been positive, with the company reporting a Profit After Tax (PAT) of ₹2.92 crores over the last six months, reflecting a 166.9% increase in profits year-on-year. This improvement is notable given the company’s historically weak long-term growth, with net sales declining at an annual rate of -14.48%.

However, the company’s long-term fundamentals remain under pressure. The average ROE of 4.73% over multiple years is below industry standards, and the stock’s long-term returns have been disappointing. Over the past three years, Garnet International has delivered a negative return of -7.63%, significantly lagging the BSE500 index’s 38.28% gain. The one-year return of -50.77% further emphasises the stock’s underperformance relative to broader market benchmarks.

These mixed financial trends suggest that while recent quarters have shown improvement, the company faces structural challenges that may limit sustained growth and profitability.

Quality Concerns Persist

One of the key concerns impacting the stock’s rating is the high level of promoter share pledging. Currently, 46.91% of promoter shares are pledged, an increase of 21.38% over the last quarter. This elevated pledge level poses a significant risk, especially in falling markets, as it can exert additional downward pressure on the stock price if margin calls are triggered.

Moreover, the company’s quality metrics remain weak, reflected in its low Mojo Grade of Sell despite the recent upgrade from Strong Sell. The market cap grade stands at 4, indicating a relatively small market capitalisation compared to larger NBFC peers, which may limit liquidity and investor interest.

These quality issues, combined with the company’s volatile price performance and promoter risk, continue to weigh heavily on investor sentiment.

Technical Outlook and Market Performance

Examining the stock’s price action, Garnet International closed at ₹60.55 on 25 February 2026, a marginal increase of 0.03% from the previous close of ₹60.53. The stock’s intraday range was ₹60.11 to ₹62.78, indicating some volatility but no decisive breakout from recent trading levels.

Over the past week, the stock has declined by 3.09%, underperforming the Sensex’s 1.47% fall. However, over the last month, Garnet International outperformed the Sensex with a 6.49% gain versus 0.84% for the benchmark. Year-to-date, the stock has delivered a strong 15.77% return, contrasting with the Sensex’s negative 3.51% return, suggesting some short-term resilience.

Longer-term returns remain disappointing, with a five-year gain of 95.32% lagging the Sensex’s 61.92% rise, and a ten-year return of just 0.92% compared to the Sensex’s 256.13%. This disparity highlights the stock’s inconsistent performance and the challenges it faces in delivering sustained shareholder value.

Conclusion: A Cautious Upgrade Amid Lingering Risks

The upgrade of Garnet International Ltd’s investment rating from Strong Sell to Sell reflects a cautious optimism driven by improved technical indicators and recent profit growth. The company’s valuation appears attractive relative to peers, supported by a rising ROE and a low PEG ratio of 0.2, signalling potential undervaluation.

Nevertheless, significant risks remain, including weak long-term sales growth, high promoter share pledging, and underwhelming long-term returns. Investors should weigh these factors carefully, recognising that while the stock may be stabilising technically, fundamental challenges could limit upside potential.

For those holding or considering Garnet International, a prudent approach involves monitoring ongoing financial results and technical signals closely, while remaining alert to sector dynamics within the NBFC space.

Only Rs. 9,999 - Get MojoOne for 1 Year + 3 Months FREE (60% Off) Start Today