Current Rating and Its Significance
The 'Sell' rating assigned to Schaeffler India Ltd indicates a cautious stance for investors considering this stock at present. This recommendation is based on a comprehensive evaluation of four key parameters: Quality, Valuation, Financial Trend, and Technicals. The rating suggests that, given the current market and company conditions, investors may want to consider reducing exposure or avoiding new positions until more favourable signals emerge.
Quality Assessment
As of 03 February 2026, Schaeffler India Ltd holds a good quality grade. This reflects the company’s solid operational framework and consistent profitability metrics. Despite this, the long-term growth outlook remains subdued, with operating profit growing at an annualised rate of just 8.21% over the past five years. While the company maintains a respectable Return on Equity (ROE) of 18.6%, indicating efficient capital utilisation, the growth rate does not fully support a more optimistic rating.
Valuation Considerations
The valuation grade for Schaeffler India Ltd is currently very expensive. The stock trades at a Price to Book Value (P/B) of 10.6, which is significantly higher than typical benchmarks for the auto components sector. Although the stock’s valuation is in line with its peers’ historical averages, the elevated P/B ratio suggests that the market has priced in substantial growth expectations. The Price/Earnings to Growth (PEG) ratio stands at 3.3, signalling that the stock may be overvalued relative to its earnings growth potential. This high valuation level is a key factor behind the 'Sell' rating, as it limits upside potential and increases downside risk if growth disappoints.
Financial Trend Analysis
Financially, the company shows a positive trend. As of 03 February 2026, Schaeffler India Ltd has delivered a 14.95% return over the past year, with profits rising by 16.5% during the same period. This indicates that the company is generating healthy earnings growth and maintaining profitability. However, the relatively modest long-term operating profit growth tempers enthusiasm. Investors should note that while recent financial performance is encouraging, it may not be sufficient to justify the current lofty valuation.
Technical Outlook
The technical grade for Schaeffler India Ltd is bearish. Recent price movements show mixed signals: the stock gained 4.28% in the last trading day and 5.58% over the past week, but it has declined by 10.28% over the last three months and 6.41% in six months. Year-to-date, the stock is down 1.22%, reflecting some short-term volatility and downward pressure. This bearish technical stance suggests that momentum is currently weak, which supports the cautious 'Sell' rating.
Stock Performance Snapshot
As of 03 February 2026, Schaeffler India Ltd’s stock performance has been mixed across different time frames. The stock’s one-year return of 14.95% is respectable, especially in the context of a midcap auto components company. However, shorter-term returns have been less encouraging, with declines over the past three and six months. This volatility highlights the importance of considering both fundamental and technical factors when evaluating the stock.
Sector and Market Context
Operating within the Auto Components & Equipments sector, Schaeffler India Ltd faces competitive pressures and cyclical demand patterns. The sector’s performance is often linked to broader automotive industry trends, which can be influenced by economic cycles, regulatory changes, and technological shifts. Investors should weigh these external factors alongside company-specific metrics when assessing the stock’s prospects.
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What This Rating Means for Investors
The 'Sell' rating on Schaeffler India Ltd advises investors to exercise caution. While the company demonstrates solid quality and positive financial trends, the very expensive valuation and bearish technical outlook suggest limited upside and increased risk. Investors holding the stock may consider trimming their positions or monitoring closely for signs of valuation correction or technical improvement before adding exposure.
For those considering new investments, the current rating implies that alternative opportunities with better risk-reward profiles may be preferable. The rating reflects a balanced view that acknowledges the company’s strengths but also highlights valuation and momentum concerns that could weigh on returns.
Summary
In summary, Schaeffler India Ltd’s 'Sell' rating as of 09 January 2026, supported by a Mojo Score of 43, is grounded in a thorough analysis of quality, valuation, financial trends, and technical factors. The company’s good quality and positive financial performance are offset by a very expensive valuation and bearish technical signals. As of 03 February 2026, investors should approach the stock with caution, recognising the potential risks embedded in its current price.
Looking Ahead
Investors should continue to monitor Schaeffler India Ltd’s operating profit growth and valuation metrics closely. Any improvement in long-term growth prospects or a correction in valuation could alter the investment thesis. Additionally, technical indicators should be watched for signs of a trend reversal that might support a more favourable rating in the future.
Company Profile Recap
Schaeffler India Ltd is a midcap company operating in the Auto Components & Equipments sector. Its market capitalisation and sector positioning make it sensitive to automotive industry cycles and broader economic conditions. The company’s current financial and market metrics provide a comprehensive picture for investors to assess its suitability within their portfolios.
Final Thoughts
Ultimately, the 'Sell' rating serves as a prudent guide for investors to evaluate Schaeffler India Ltd’s stock in the context of its current fundamentals and market environment. While the company has strengths, the elevated valuation and technical weakness warrant a cautious approach.
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