Response Informatics Ltd Downgraded to Strong Sell Amid Weak Fundamentals and Bearish Technicals

Quality Assessment: Weakening Fundamentals and Profitability

Response Informatics Ltd’s quality metrics continue to disappoint investors. The company’s average Return on Equity (ROE) stands at a modest 6.76%, signalling limited efficiency in generating shareholder returns. This figure is considerably below industry averages for software product firms, which typically exhibit ROEs in the mid-teens or higher. Furthermore, the company’s ability to service its debt remains fragile, with an average EBIT to interest coverage ratio of just 0.45. This low ratio indicates that operating earnings are insufficient to comfortably cover interest expenses, raising concerns about financial stability.

Quarterly results for Q2 FY25-26 have been flat, with net sales for the nine months ending September 2025 declining by 21.94% to ₹19.39 crores. This contraction in revenue highlights operational challenges and a lack of growth momentum. The company’s majority shareholding remains with promoters, but this has not translated into improved operational performance or strategic initiatives to reverse the downtrend.

Valuation: Attractive on Price-to-Book but Overshadowed by Weak Returns

Despite the negative fundamentals, Response Informatics Ltd’s valuation metrics present a somewhat attractive picture. The stock trades at a Price to Book (P/B) ratio of 1.2, which is below the historical average valuations of its peers in the software products sector. This discount suggests that the market is pricing in the company’s challenges, offering a potential entry point for value investors.

However, this valuation attractiveness is tempered by the company’s poor stock performance and earnings trajectory. Over the past year, the stock has generated a negative return of 62.19%, significantly underperforming the BSE Sensex, which posted a positive 6.56% return over the same period. Additionally, profits have declined by 4% over the last year, signalling that the company’s earnings are not keeping pace with its valuation discount.

Financial Trend: Flat to Negative Growth and Underperformance

The financial trend for Response Informatics Ltd remains lacklustre. The company’s net sales have contracted sharply in recent quarters, with a 21.94% decline in the nine months to September 2025. This negative growth trend is compounded by the stock’s poor returns across multiple time horizons. Over one week, the stock fell 17.85%, compared to a 2.43% decline in the Sensex. Over one month, the stock dropped 33.46%, while the Sensex declined only 4.66%. Year-to-date, the stock is down 26.06%, versus a 4.32% fall in the benchmark index.

Longer-term performance is even more concerning. Over the past year, the stock has lost 62.19%, while the Sensex gained 6.56%. Over three years, Response Informatics Ltd’s stock has declined 43.26%, in stark contrast to the Sensex’s 33.80% gain. These figures underscore the company’s sustained underperformance relative to the broader market and its sector peers.

Technical Analysis: Downgrade to Bearish Signals

The downgrade to Strong Sell was primarily driven by a deterioration in technical indicators. The technical grade shifted from mildly bearish to outright bearish, reflecting increased selling pressure and weakening momentum. Key technical metrics paint a negative picture:

• MACD: Both weekly and monthly Moving Average Convergence Divergence indicators are bearish, signalling downward momentum.


• Bollinger Bands: Weekly and monthly readings are bearish, indicating price volatility skewed to the downside.


• Moving Averages: Daily moving averages are bearish, confirming a short-term downtrend.


• KST (Know Sure Thing): Weekly mildly bearish and monthly bearish readings further reinforce the negative trend.


• Dow Theory: Weekly mildly bearish, though monthly remains mildly bullish, suggesting some longer-term uncertainty but predominantly negative near-term sentiment.

The stock’s current price stands at ₹23.29, down 4.94% on the day from a previous close of ₹24.50. It is trading near its 52-week low of ₹20.00, far below its 52-week high of ₹63.00, highlighting the significant price erosion over the past year.

Contextualising the Downgrade: Industry and Market Comparison

Response Informatics Ltd operates within the software products sector, a space that has generally seen robust growth and innovation. However, the company’s performance contrasts sharply with sector peers, many of whom have delivered positive returns and stronger financial metrics. The company’s Mojo Score of 26.0 and Mojo Grade of Strong Sell reflect this divergence, indicating a high risk profile relative to the sector.

Its market capitalisation grade of 4 suggests a relatively small market cap, which can contribute to higher volatility and liquidity concerns. The stock’s underperformance against the BSE500 index over one year and three years further emphasises its struggles to keep pace with broader market gains.

Investor Takeaway: Caution Advised Amid Persistent Weakness

Given the combination of weak financial fundamentals, deteriorating technical indicators, and sustained underperformance relative to benchmarks, investors are advised to exercise caution with Response Informatics Ltd. The downgrade to Strong Sell reflects a consensus view that the stock is likely to face continued headwinds in the near to medium term.

While the valuation appears attractive on a price-to-book basis, this is overshadowed by the company’s poor earnings growth and profitability metrics. The technical outlook suggests further downside risk, and the flat financial trend offers little indication of an imminent turnaround.

Investors seeking exposure to the software products sector may wish to consider alternative stocks with stronger fundamentals and more favourable technical profiles.

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