Understanding the Current Rating
The Strong Sell rating assigned to Karma Energy Ltd indicates a cautious stance for investors, signalling significant concerns across multiple evaluation parameters. This rating is derived from a comprehensive assessment of the company’s quality, valuation, financial trend, and technical outlook. It suggests that the stock currently carries elevated risks and may not be suitable for investors seeking stable or growth-oriented opportunities.
Quality Assessment
As of 17 February 2026, Karma Energy Ltd’s quality grade is categorised as below average. The company continues to face operational challenges, reflected in persistent operating losses and weak long-term fundamental strength. Its ability to service debt remains strained, with an average EBIT to interest ratio of -1.51, indicating that earnings before interest and taxes are insufficient to cover interest expenses. Additionally, the company’s return on equity (ROE) stands at a modest 2.42%, signalling low profitability relative to shareholders’ funds. These factors collectively weigh heavily on the company’s quality profile and contribute to the cautious rating.
Valuation Perspective
From a valuation standpoint, Karma Energy Ltd is considered risky. The stock trades at levels that are unfavourable compared to its historical averages, reflecting investor concerns about its financial health and growth prospects. Despite a notable 235% increase in profits over the past year, the stock has delivered a negative return of -16.23% during the same period. This divergence is captured in the company’s price/earnings to growth (PEG) ratio of 0.1, which, while low, is overshadowed by the overall risk profile and negative market sentiment. Investors should be wary of the valuation risks inherent in the stock’s current pricing.
Financial Trend and Performance
The financial trend for Karma Energy Ltd remains flat, with recent quarterly results underscoring ongoing challenges. The company reported its lowest quarterly PBDIT (profit before depreciation, interest, and taxes) at Rs -1.92 crore and a PBT (profit before tax) less other income of Rs -2.48 crore in the December 2025 quarter. These figures highlight the company’s struggle to generate positive earnings and improve its financial trajectory. Furthermore, the stock has underperformed the broader market, with the BSE500 index delivering a 13.21% return over the past year, while Karma Energy Ltd’s stock declined by 16.23%. This underperformance emphasises the company’s difficulties in keeping pace with sector and market trends.
Technical Outlook
The technical grade for Karma Energy Ltd is currently bearish. The stock’s price movements over recent months have shown a downward trajectory, with a 3-month decline of 18.37% and a 6-month decline of 18.34%. Year-to-date, the stock has fallen by 8.80%, reflecting sustained selling pressure. The lack of positive momentum and technical indicators pointing to weakness reinforce the cautious stance advised by the rating.
Stock Returns and Market Context
As of 17 February 2026, Karma Energy Ltd’s stock returns paint a challenging picture for investors. The stock has remained flat over the last day, with a 0.00% change, and posted a modest 3.89% gain over the past week. However, these short-term gains are overshadowed by longer-term declines: a 3.61% drop over one month, and nearly 18.4% declines over both three and six months. The one-year return of -16.23% contrasts sharply with the broader market’s positive performance, underscoring the stock’s relative weakness and the risks it carries for investors.
Implications for Investors
The Strong Sell rating on Karma Energy Ltd serves as a clear signal for investors to exercise caution. The company’s below-average quality, risky valuation, flat financial trend, and bearish technical outlook collectively suggest that the stock may face continued headwinds. Investors should carefully consider these factors in the context of their portfolios and risk tolerance. For those seeking more stable or growth-oriented investments within the power sector or broader market, alternative opportunities may be preferable at this time.
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Company Profile and Market Capitalisation
Karma Energy Ltd operates within the power sector and is classified as a microcap company. Its relatively small market capitalisation contributes to higher volatility and liquidity risks, which investors should factor into their decision-making process. The company’s operational challenges and financial metrics further compound these risks, making it a less attractive option for conservative investors.
Summary of Key Metrics as of 17 February 2026
The company’s Mojo Score currently stands at 12.0, reflecting a significant decline from its previous score of 33. This drop corresponds with the rating shift from 'Sell' to 'Strong Sell' on 01 August 2025. The quality, valuation, financial, and technical grades collectively underpin this score, signalling a high-risk profile. Investors should note the stock’s negative EBITDA, weak debt servicing ability, and underperformance relative to the broader market as critical considerations.
Conclusion
In conclusion, Karma Energy Ltd’s Strong Sell rating by MarketsMOJO is supported by a comprehensive evaluation of its current financial and market position as of 17 February 2026. The company’s below-average quality, risky valuation, flat financial trend, and bearish technical outlook present significant challenges. Investors are advised to approach this stock with caution and consider alternative investments that offer stronger fundamentals and more favourable risk-return profiles.
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