Religare Enterprises Ltd Upgraded to Hold as Technicals Improve Amid Mixed Financial Trends

Quality Assessment: Long-Term Fundamentals Remain Robust

Religare Enterprises, operating within the Non Banking Financial Company (NBFC) sector, continues to demonstrate strong long-term fundamental strength. The company has achieved a compound annual growth rate (CAGR) of 26.73% in operating profits over recent years, signalling solid operational efficiency and growth potential. This robust growth trajectory is a key factor supporting the Hold rating despite some short-term financial stagnation.

However, the latest quarterly financials for Q2 FY25-26 reveal a flat performance, with Profit After Tax (PAT) for the last six months at ₹49.05 crores, reflecting a decline of 29.25%. Similarly, Profit Before Tax excluding Other Income (PBT less OI) for the quarter stood at ₹38.97 crores, down 19.35%. These figures indicate near-term challenges that temper enthusiasm but do not overshadow the company’s longer-term growth narrative.

Valuation: Expensive Yet Discounted Relative to Peers

Religare Enterprises is currently trading at a Price to Book (P/B) ratio of 3.0, which is considered expensive relative to its own historical valuations. Nevertheless, when compared to its peer group within the NBFC sector, the stock is trading at a discount, suggesting some valuation support. The company’s Return on Equity (ROE) stands at a modest 3.6%, which is below industry averages, raising questions about capital efficiency.

Interestingly, the Price/Earnings to Growth (PEG) ratio is 0.5, indicating that the stock may be undervalued relative to its earnings growth potential. This metric is particularly relevant given the company’s strong operating profit CAGR, signalling that the market may not have fully priced in its growth prospects.

Financial Trend: Mixed Signals Amidst Flat Recent Performance

While the recent quarterly results have been flat, the company’s long-term financial trend remains positive. Operating profits have grown at a CAGR of 26.73%, highlighting sustained operational improvement over multiple years. However, the latest six-month PAT decline of 29.25% and a 19.35% fall in PBT less other income indicate short-term headwinds.

Moreover, institutional investor participation has decreased by 1.64% in the previous quarter, with these investors now holding 18.08% of the company’s shares. This reduction in institutional stake may reflect concerns about near-term performance or valuation, given that institutional investors typically possess superior analytical resources.

Technical Analysis: Shift to Mildly Bullish Momentum

The upgrade to Hold is largely driven by a positive shift in technical indicators. The technical trend has moved from sideways to mildly bullish, supported by several key metrics. Daily moving averages are bullish, and Bollinger Bands on both weekly and monthly charts indicate bullish momentum. The Dow Theory assessment is mildly bullish on a weekly basis, although monthly signals remain mixed.

Conversely, some indicators remain cautious: the MACD is mildly bearish on both weekly and monthly timeframes, and the KST (Know Sure Thing) indicator is bearish weekly and mildly bearish monthly. The On-Balance Volume (OBV) shows no clear trend weekly and is mildly bearish monthly. The Relative Strength Index (RSI) currently provides no clear signal on either timeframe.

Price action supports this mixed technical picture. The stock closed at ₹260.80 on 6 Jan 2026, up 4.61% from the previous close of ₹249.30. The 52-week high is ₹314.15, while the low is ₹202.45, indicating a wide trading range. Recent returns outperform the Sensex over short-term periods: 6.93% versus 0.88% over one week, and 10.67% versus -0.32% over one month. However, the stock has underperformed over the past year with a -8.09% return compared to Sensex’s 7.85%.

Comparative Performance: Outperformance and Underperformance

Religare Enterprises has delivered mixed returns relative to the broader market. Over five years, the stock has generated a remarkable 267.84% return, significantly outperforming the Sensex’s 76.39%. Over three years, the stock’s 46.39% gain slightly exceeds the Sensex’s 41.57%. However, the last year has been challenging, with the stock declining 8.09% while the Sensex rose 7.85%. Over ten years, the stock has underperformed the Sensex substantially, with a -14.04% return versus the Sensex’s 234.01%.

This uneven performance highlights the cyclical nature of the NBFC sector and the company’s sensitivity to market and economic conditions. The recent upgrade to Hold reflects a balanced view that acknowledges both the company’s long-term strengths and short-term challenges.

Outlook and Investment Implications

The upgrade of Religare Enterprises Ltd’s rating to Hold reflects a cautious but constructive stance. The company’s strong long-term operating profit growth and discounted valuation relative to peers provide a foundation for potential upside. However, the flat recent financial performance, modest ROE, and reduced institutional participation warrant prudence.

Technically, the shift to a mildly bullish trend suggests that the stock may be poised for moderate gains in the near term, supported by positive daily moving averages and bullish Bollinger Bands. Yet, mixed signals from momentum indicators and the underperformance over the past year highlight ongoing risks.

Investors should weigh these factors carefully, considering Religare Enterprises as a Hold within a diversified portfolio, particularly for those with a medium to long-term horizon who can tolerate some volatility. Monitoring upcoming quarterly results and institutional activity will be critical to reassessing the stock’s trajectory.

Summary of Ratings and Scores

As of 5 Jan 2026, Religare Enterprises Ltd holds a Mojo Score of 52.0, upgraded from a previous Sell grade to Hold. The Market Cap Grade remains at 3, reflecting a mid-tier valuation status. The technical grade improvement from sideways to mildly bullish was the primary catalyst for the rating change, complemented by steady long-term fundamentals despite recent flat earnings.

Conclusion

Religare Enterprises Ltd’s rating upgrade to Hold by MarketsMOJO encapsulates a balanced view of the company’s prospects. While short-term financial results have disappointed, the underlying quality of earnings growth and improving technical momentum justify a more optimistic stance than before. Investors should remain vigilant to evolving market conditions and company performance, but the current assessment suggests a stabilising outlook for this NBFC stock.

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