Trio Mercantile & Trading Ltd Upgraded to Sell on Technical Improvement

Quality Assessment: Weak Fundamentals Persist

Despite the recent upgrade in rating, Trio Mercantile & Trading Ltd’s fundamental quality remains under pressure. The company reported flat financial performance in the second quarter of FY25-26, with operating losses continuing to weigh heavily on its earnings profile. Net sales have declined at an annualised rate of -25.62%, signalling a persistent contraction in core business activities. This negative growth trajectory is further underscored by a 32% fall in profits over the past year, reflecting deteriorating operational efficiency and profitability.

The company’s long-term fundamental strength is classified as weak, with negative EBITDA marking it as a risky proposition for investors seeking stable returns. The majority shareholding remains with non-institutional investors, which may limit the availability of strategic capital and governance oversight that institutional backing often provides.

Valuation: Risky Compared to Historical Averages

From a valuation standpoint, Trio Mercantile & Trading Ltd is trading at levels considered risky relative to its historical averages. The stock price currently stands at ₹0.74, having risen modestly from the previous close of ₹0.72, but still significantly below its 52-week high of ₹1.32. Over the last year, the stock has delivered a negative return of -34.51%, starkly contrasting with the Sensex’s positive 8.65% gain over the same period. This divergence highlights the stock’s underperformance and elevated risk profile.

Longer-term returns paint an even more challenging picture, with the stock down by -29.52% over three years and a staggering -84.81% over five years, while the Sensex has appreciated by 36.79% and 68.52% respectively. Such valuation metrics suggest that the market continues to price in significant uncertainty around the company’s prospects.

Financial Trend: Flat to Negative Performance Continues

The company’s financial trend remains subdued, with no significant improvement in recent quarters. The flat results reported in September 2025 reinforce the narrative of stagnation. Operating losses persist, and the negative EBITDA status signals ongoing cash flow challenges. This financial stagnation is compounded by the company’s inability to generate meaningful sales growth, which has contracted sharply over recent years.

Such trends are concerning for investors, as they indicate limited near-term catalysts for a turnaround. The company’s weak financial health is a key factor in maintaining a cautious stance despite technical improvements.

Technical Analysis: Shift from Mildly Bearish to Mildly Bullish

The primary driver behind the recent upgrade in investment rating is a notable improvement in technical indicators. The technical grade has shifted from mildly bearish to mildly bullish, reflecting a more positive short-term outlook for the stock price movement.

Key technical signals include a bullish daily moving average and weekly Bollinger Bands indicating upward momentum. The MACD (Moving Average Convergence Divergence) is mildly bullish on both weekly and monthly charts, suggesting growing buying interest. However, some indicators remain mixed: the KST (Know Sure Thing) oscillator is mildly bearish weekly and bearish monthly, while the Dow Theory signals remain mildly bearish on both timeframes. The RSI (Relative Strength Index) shows no clear signal, indicating a neutral momentum stance.

Overall, these mixed but improving technical signals have encouraged a more optimistic view on the stock’s price trajectory, justifying the upgrade from Strong Sell to Sell despite fundamental weaknesses.

Stock Price and Market Performance

Trio Mercantile & Trading Ltd’s stock price has shown some resilience recently, with a 2.78% gain on the day of the rating change, closing at ₹0.74. The stock’s weekly return of 8.82% significantly outperformed the Sensex’s decline of -0.75% over the same period, indicating short-term buying interest. Year-to-date, the stock has gained 7.25%, while the Sensex is down by -2.32%, further highlighting the divergence in momentum.

Despite these short-term gains, the longer-term performance remains weak, with the stock underperforming the broader market by a wide margin over one, three, five, and ten-year horizons. This disparity underscores the importance of cautious optimism, as technical improvements may not yet be supported by fundamental recovery.

Conclusion: A Cautious Upgrade Amidst Mixed Signals

The upgrade of Trio Mercantile & Trading Ltd’s investment rating from Strong Sell to Sell reflects a nuanced assessment balancing technical improvements against persistent fundamental challenges. While the company’s financial health and valuation metrics remain weak, the shift in technical indicators to a mildly bullish stance suggests potential for short-term price appreciation.

Investors should remain cautious given the company’s ongoing operating losses, negative EBITDA, and poor long-term growth trends. The stock’s historical underperformance relative to the Sensex and its risky valuation profile further temper enthusiasm. However, the recent technical momentum may offer tactical trading opportunities for those with a higher risk tolerance.

In summary, the rating upgrade to Sell from Strong Sell by MarketsMOJO reflects a technical rebound rather than a fundamental turnaround. Investors should weigh the improved technical outlook against the company’s ongoing financial struggles before making investment decisions.

Upgrade at special rates, valid only for the next few days. Claim Your Special Rate →