Sangam Finserv Ltd Upgraded to Sell on Technical Improvements Despite Weak Fundamentals

Quality Assessment: Weak Fundamentals Persist

Sangam Finserv’s quality metrics continue to reflect underlying weaknesses. The company’s average Return on Equity (ROE) stands at a modest 5.60%, signalling limited profitability relative to shareholder equity. This figure is below the industry average for NBFCs, which typically exhibit ROEs in the mid-teens. Furthermore, the company’s long-term growth trajectory remains disappointing, with net sales declining at an annualised rate of -1.68% and operating profit contracting by -9.32% over recent years.

Quarterly results for Q2 FY25-26 reinforce this subdued performance. Profit Before Tax excluding other income (PBT less OI) fell sharply by 39.38% to ₹1.97 crores, while Profit After Tax (PAT) declined by 24.1% to ₹1.89 crores. These figures highlight the company’s struggle to generate consistent earnings growth, which weighs heavily on its quality grade. Consequently, the Mojo Grade for quality remains low, contributing to the overall cautious stance on the stock.

Valuation: Fair but Premium Relative to Peers

Despite weak fundamentals, Sangam Finserv’s valuation metrics suggest a fair but somewhat stretched position. The stock trades at a Price to Book Value (P/BV) ratio of 1.4, which is slightly above the average historical valuations of its NBFC peers. This premium valuation is not fully supported by the company’s earnings performance, especially given the flat financial results and declining profitability.

The company’s Return on Equity of 5.8% aligns with this fair valuation, but investors should note that the stock’s price appreciation over the past year has not been underpinned by earnings growth. In fact, profits have marginally fallen by -0.7% during this period, while the stock price has declined by -24.67%. This divergence between price and earnings growth raises concerns about the sustainability of the current valuation level.

Financial Trend: Flat to Negative Performance Over Recent Periods

The financial trend for Sangam Finserv remains largely flat to negative, which has restrained any significant upgrade in its investment rating. The company’s quarterly performance has been lacklustre, with key profitability metrics declining sharply as noted earlier. Over the last one year, the stock has underperformed the broader market significantly. While the BSE500 index generated returns of 8.76%, Sangam Finserv’s stock price declined by 24.67%, reflecting investor scepticism.

Longer-term returns present a more mixed picture. Over three and five years, the stock has delivered impressive cumulative returns of 277.13% and 365.49% respectively, outperforming the Sensex’s 37.97% and 72.66% gains over the same periods. Over ten years, the stock’s return of 731.22% dwarfs the Sensex’s 234.22%. However, the recent one-year underperformance and flat financial results suggest that the company is currently facing headwinds that limit near-term growth prospects.

Technicals: Key Driver Behind Upgrade

The primary catalyst for the upgrade from Strong Sell to Sell is the improvement in technical indicators, which have shifted from a sideways to a mildly bearish trend. This subtle change in technical momentum has been reflected in several key metrics:

• MACD: Weekly readings have turned bullish, indicating short-term upward momentum, although monthly readings remain mildly bearish.


• Bollinger Bands: Both weekly and monthly charts show bullish signals, suggesting the stock price is trading near the upper band and may continue to rise in the short term.


• Moving Averages: Daily moving averages remain mildly bearish, indicating some caution in the immediate term.


• KST (Know Sure Thing): Weekly KST is mildly bullish, while monthly KST remains mildly bearish, reflecting mixed momentum across timeframes.


• Dow Theory: Both weekly and monthly indicators are mildly bullish, supporting a cautiously optimistic outlook.

These technical signals have contributed to a more favourable market sentiment, reflected in the stock’s recent price movement. The stock closed at ₹40.73 on 27 January 2026, up 5.82% from the previous close of ₹38.49. The day’s trading range was ₹36.00 to ₹40.99, showing increased volatility but also upward pressure. The 52-week high and low stand at ₹69.56 and ₹25.55 respectively, indicating significant price recovery potential from recent lows.

Market Capitalisation and Ownership

Sangam Finserv’s market capitalisation grade is rated 4, reflecting its micro-cap status within the NBFC sector. The majority shareholding remains with promoters, which may provide some stability but also limits liquidity and broader institutional interest. Investors should weigh this factor alongside the company’s financial and technical profile when considering exposure.

Conclusion: Cautious Optimism Amidst Fundamental Challenges

The upgrade of Sangam Finserv Ltd’s investment rating from Strong Sell to Sell reflects a cautious optimism driven primarily by improved technical indicators. While the company’s quality and financial trends remain weak, and valuation appears stretched relative to earnings performance, the recent bullish signals in momentum indicators have prompted a less negative stance.

Investors should remain vigilant given the company’s flat quarterly results, declining profitability, and underperformance relative to the broader market over the past year. The stock’s premium valuation and promoter-dominated shareholding structure add further layers of risk. However, the improved technical outlook may offer short-term trading opportunities for those willing to accept the underlying fundamental risks.

Overall, Sangam Finserv’s current Mojo Score of 41.0 and Sell grade suggest that while the stock is no longer a strong sell, it remains a cautious hold with limited upside until fundamental improvements materialise.

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