Real Touch Finance Ltd. Upgraded from Strong Sell to Sell Amid Mixed Fundamentals and Technical Signals

Quality Assessment: Persistent Fundamental Weakness

Despite the recent upgrade, Real Touch Finance continues to exhibit weak long-term fundamental strength. The company’s average Return on Equity (ROE) remains modest at 6.20%, signalling limited efficiency in generating shareholder returns relative to equity capital. This figure is considerably below industry averages for NBFCs, which typically range higher, reflecting stronger capital utilisation.

However, the company has demonstrated consistent operational resilience, having declared positive results for 12 consecutive quarters. The latest six-month period saw a Profit After Tax (PAT) of ₹3.36 crores, growing at an impressive 52.04%, while net sales rose 27.27% to ₹16.85 crores. Quarterly Earnings Per Share (EPS) reached a peak of ₹1.59, indicating improving profitability on a per-share basis.

Nonetheless, these positive earnings trends have not translated into a robust fundamental rating, as the overall quality grade remains subdued due to the low ROE and underperformance relative to broader market indices.

Valuation: Attractive Yet Reflective of Risks

Valuation metrics present a more encouraging picture. Real Touch Finance trades at a Price to Book Value (P/BV) of 1.3, which is considered fair and attractive when benchmarked against peer averages in the NBFC sector. This valuation suggests the market is pricing in both the company’s growth prospects and its inherent risks.

The company’s Return on Equity for the latest period has improved to 12.2%, supporting the valuation uplift. Moreover, the Price/Earnings to Growth (PEG) ratio stands at a low 0.2, signalling that the stock is undervalued relative to its earnings growth potential. This metric is particularly compelling for value investors seeking growth at a reasonable price.

Despite these positives, the stock’s price performance has been disappointing over the past year, with a return of -39.58%, starkly contrasting with the BSE500 index’s 5.24% gain. This divergence underscores market scepticism about the company’s sustainability and growth trajectory.

Financial Trend: Mixed Signals Amid Growth

Financially, Real Touch Finance has shown encouraging growth in recent quarters, with PAT and net sales expanding significantly. The company’s earnings growth of 60% over the past year contrasts sharply with its negative stock returns, highlighting a disconnect between market sentiment and operational performance.

However, the long-term financial trend remains weak, as evidenced by the company’s underperformance relative to the Sensex and BSE500 indices. Over one year, the stock returned -39.58%, while the Sensex gained 7.62%. This underperformance raises concerns about the company’s ability to sustain growth and improve shareholder value over time.

Longer-term returns tell a more positive story, with the stock delivering 71.23% over three years and an impressive 488.24% over five years, outperforming the Sensex’s 38.54% and 77.88% respectively. This suggests that while short-term challenges persist, the company has demonstrated strong growth potential historically.

Technical Analysis: Key Driver of Upgrade

The primary catalyst for the recent upgrade from Strong Sell to Sell is the improvement in technical indicators. The technical grade has shifted from bearish to mildly bearish, reflecting a stabilisation in price momentum and a potential bottoming out of the stock’s decline.

Weekly Moving Average Convergence Divergence (MACD) readings have turned mildly bullish, signalling a possible shift in momentum. Conversely, monthly MACD remains mildly bearish, indicating that longer-term trends are still cautious. Relative Strength Index (RSI) on both weekly and monthly charts shows no clear signal, suggesting a neutral momentum environment.

Bollinger Bands on the weekly chart indicate sideways movement, while monthly bands remain mildly bearish, reinforcing the view of consolidation rather than a strong downtrend. Daily moving averages are mildly bearish, but the overall technical picture is improving.

Other technical indicators such as the Know Sure Thing (KST) oscillator and Dow Theory assessments remain bearish or mildly bearish, but the absence of strong negative trends on weekly charts supports the upgrade decision.

On the price front, the stock closed at ₹50.00 on 30 Dec 2025, up 2.21% from the previous close of ₹48.92. The 52-week range remains wide, with a high of ₹87.46 and a low of ₹29.84, indicating significant volatility but also potential for recovery.

Market Position and Shareholding

Real Touch Finance operates within the NBFC sector, a highly competitive and regulated industry. The company’s market capitalisation grade stands at 4, reflecting its micro-cap status and relatively modest size compared to larger NBFC peers.

Promoters remain the majority shareholders, providing stability in ownership and strategic direction. However, the stock’s recent underperformance relative to the Sensex and sector benchmarks has tempered investor enthusiasm.

Investors should note that while the company’s long-term returns over five and ten years have been impressive, recent volatility and fundamental weaknesses warrant a cautious approach.

Conclusion: A Cautious Upgrade Reflecting Technical Recovery

The upgrade of Real Touch Finance Ltd. from Strong Sell to Sell is primarily driven by an improved technical outlook, signalling a potential stabilisation in the stock’s price action. While operational performance has shown encouraging growth in earnings and sales, fundamental weaknesses such as low ROE and significant underperformance relative to market indices persist.

Valuation metrics suggest the stock is attractively priced relative to its growth prospects, but the disconnect between earnings growth and stock returns highlights ongoing investor scepticism. The technical indicators’ shift to mildly bearish from strongly bearish provides a tentative signal that the stock may be poised for a recovery phase, though risks remain.

Investors should weigh these mixed signals carefully, considering both the improving technical momentum and the underlying fundamental challenges before making investment decisions.

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