Real Touch Finance Ltd. Downgraded to Strong Sell Amid Bearish Technicals and Weak Fundamentals

Quality Assessment: Mixed Financial Performance Amid Weak Long-Term Fundamentals

Real Touch Finance has demonstrated some encouraging signs in its recent quarterly performance, with Q2 FY25-26 marking the highest net sales at ₹8.67 crores and a quarterly PAT of ₹2.02 crores, alongside an EPS of ₹1.59. The company has reported positive results for 12 consecutive quarters, signalling operational resilience in the short term.

However, the long-term fundamental strength remains weak. The average Return on Equity (ROE) stands at a modest 6.20%, which is below industry expectations for NBFCs. This low ROE indicates limited efficiency in generating shareholder returns over time. Although the latest quarter showed an improved ROE of 12.2%, this has not been sufficient to offset the broader trend of underperformance.

Moreover, the company’s Price to Book Value ratio of 1.3 suggests that the stock is trading at a fair valuation relative to its peers, but this valuation is not supported by robust fundamentals. The PEG ratio of 0.2 indicates that while profits have risen by 60% over the past year, the stock price has not kept pace, reflecting investor scepticism.

Valuation Perspective: Attractive Yet Risky

From a valuation standpoint, Real Touch Finance appears attractively priced. The stock’s current price of ₹48.50 is significantly below its 52-week high of ₹85.00, and above its 52-week low of ₹29.84, indicating a wide trading range. Despite the recent 4.17% gain on the day of the rating change, the stock has underperformed the broader market indices over the past year.

Specifically, while the BSE500 index has generated a 10.15% return in the last 12 months, Real Touch Finance has delivered a negative return of -42.26%. This stark contrast highlights the market’s cautious stance on the stock, likely due to concerns over its financial stability and growth prospects.

Longer-term returns tell a more nuanced story. Over five and ten years, the stock has delivered impressive returns of 405.21% and 291.13% respectively, outperforming the Sensex’s 68.97% and 236.47% in the same periods. This suggests that while the company has had strong historical growth, recent performance has faltered significantly.

Financial Trend: Positive Quarterly Growth Contrasted by Market Underperformance

Real Touch Finance’s financial trend shows a positive trajectory in quarterly earnings, with the latest quarter marking record highs in net sales, PAT, and EPS. This consistent quarterly growth over the last year is a positive signal for operational performance and profitability.

However, this financial improvement has not translated into stock price appreciation. The company’s stock return over the past year is -42.26%, a significant underperformance compared to the Sensex’s 9.56% gain. This divergence suggests that investors remain wary of the company’s long-term prospects, possibly due to concerns about its fundamental strength and sector risks.

Additionally, the company’s promoter holding remains majority, which can be a double-edged sword—providing stability but also raising questions about governance and liquidity.

Technical Analysis: Downgrade Driven by Bearish Indicators

The most significant factor driving the downgrade to Strong Sell is the deterioration in technical indicators. The technical grade shifted from mildly bearish to outright bearish, signalling increased downside risk in the near term.

Key technical metrics include:

• MACD: Weekly readings are bearish, with monthly readings mildly bearish, indicating weakening momentum.


• RSI: Both weekly and monthly RSI show no clear signal, suggesting a lack of strong buying interest.


• Bollinger Bands: Weekly bands are sideways, but monthly bands have turned bearish, implying potential for further price declines.


• Moving Averages: Daily moving averages are bearish, reinforcing the negative short-term trend.


• KST (Know Sure Thing): Weekly readings are bearish, with monthly mildly bearish, confirming momentum loss.


• Dow Theory: Weekly shows no trend, while monthly is mildly bullish, indicating mixed signals but overall weakness.


• On-Balance Volume (OBV): Weekly shows no trend, monthly mildly bearish, suggesting weak volume support for price gains.

These technical signals collectively point to a bearish outlook, justifying the downgrade in the technical grade and the overall investment rating.

Stock Price and Market Context

On the day of the rating change, Real Touch Finance’s stock closed at ₹48.50, up 4.17% from the previous close of ₹46.56. The intraday range was ₹44.25 to ₹48.50, reflecting some volatility. Despite this short-term gain, the stock remains well below its 52-week high of ₹85.00, underscoring the challenges it faces in regaining investor confidence.

Comparatively, the Sensex has delivered a positive return of 9.56% over the last year, highlighting the stock’s relative weakness within the broader market.

Conclusion: Downgrade Reflects Heightened Risks Despite Operational Positives

The downgrade of Real Touch Finance Ltd. to a Strong Sell rating by MarketsMOJO reflects a comprehensive assessment of the company’s quality, valuation, financial trend, and technical outlook. While the company has shown operational improvements with record quarterly results and consistent profit growth, its weak long-term fundamentals, poor relative stock performance, and deteriorating technical indicators have raised significant concerns.

Investors should be cautious given the bearish technical signals and the company’s underperformance relative to the broader market. The stock’s fair valuation is overshadowed by its weak ROE and negative one-year returns, suggesting limited upside potential in the near term.

Real Touch Finance remains a challenging proposition for investors seeking stable growth in the NBFC sector, and the Strong Sell rating underscores the need for careful portfolio consideration.

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