Central Bank of India’s 0.96% Weekly Decline: Technical Weakness Amid Strong Fundamentals

2 February: Downgrade to Sell Amid Bearish Technicals and Underperformance

On 2 February, Central Bank of India was downgraded by MarketsMOJO from a Hold to a Sell rating, reflecting a deterioration in technical indicators and persistent underperformance relative to benchmarks. The stock closed at ₹36.36, down 2.78% from the previous close of ₹37.40, while the Sensex fell 1.03% to 35,814.09. This downgrade was driven by bearish momentum signals, including weakening moving averages and negative technical grades.

Despite the downgrade, the bank’s fundamentals remained strong, with a reported highest quarterly profit after tax of ₹1,262.60 crores in Q3 FY25-26 and a net profit CAGR of 44.88%. Asset quality metrics were robust, with gross NPA at 2.70% and net NPA at 0.45%. Valuation metrics also appeared attractive, with a price-to-book ratio of 0.8 and a PEG ratio of 0.3, indicating undervaluation relative to earnings growth potential.

However, the stock’s price performance lagged significantly, declining 28.85% over the past year despite profit growth of 31.4%. Technical indicators such as MACD, RSI, and Bollinger Bands showed mixed but predominantly bearish signals, reinforcing the cautious outlook.

2 February: Bearish Momentum Confirmed Amid Technical Downturn

The same day, technical analysis confirmed a shift into a bearish phase. The stock’s intraday range was volatile, with a high of ₹37.32 and a low of ₹35.75. The MarketsMOJO technical trend assessment moved from mildly bearish to outright bearish, signalling increased downside risk. Daily moving averages were firmly bearish, and the Know Sure Thing (KST) indicator was negative on weekly and monthly charts.

While the weekly MACD showed mild bullishness, the monthly MACD was bearish, indicating weakening longer-term momentum. The Relative Strength Index hovered neutrally, suggesting indecision among traders. Volume-based indicators lacked strong confirmation, further complicating the outlook.

Comparatively, the stock underperformed the Sensex over most recent periods, with a one-year return of -28.85% versus the Sensex’s +5.16%. This divergence highlighted investor concerns despite the bank’s solid fundamentals.

5 February: Technical Momentum Shifts to Mildly Bearish Amid Mixed Signals

On 5 February, the stock showed a modest recovery, closing at ₹37.28, up 1.66% from ₹36.67 the previous day. The intraday range was ₹36.39 to ₹37.45, indicating some consolidation. Despite this gain, the broader technical picture remained mixed. The weekly MACD turned mildly bullish, suggesting potential short-term momentum improvement, but the monthly MACD stayed bearish, signalling longer-term caution.

RSI readings remained neutral, and Bollinger Bands indicated sideways movement weekly but bearish pressure monthly. Daily moving averages were mildly bearish, with the stock trading near resistance levels. The KST indicator was bearish on both weekly and monthly charts, reinforcing the cautious stance.

Relative to the Sensex, the stock underperformed over the week and month, with a one-year return of -26.32% versus the Sensex’s +6.66%. However, the stock’s five-year return of 158.89% remained strong, reflecting solid historical growth despite recent challenges.

6 February: Technical Momentum Shifts Back to Bearish with Weakening Price Trends

On the final trading day of the week, 6 February, Central Bank of India’s shares closed at ₹37.04, a slight gain of 0.11% from the previous close of ₹37.00. However, technical momentum shifted back to a more pronounced bearish trend. Daily moving averages were decisively bearish, and monthly Bollinger Bands turned bearish, indicating expanding downside volatility.

The weekly MACD remained mildly bullish, but the monthly MACD stayed bearish, highlighting the divergence between short- and long-term trends. The KST indicator was firmly bearish on both weekly and monthly charts. RSI readings remained neutral, and volume indicators showed mild weekly bullishness but no clear monthly trend.

Dow Theory assessments were mildly bearish weekly and mildly bullish monthly, reflecting a transitional phase. The stock’s relative performance remained weak, with a one-year return of -28.23% versus the Sensex’s +6.44%. The five-year outperformance of 150.34% versus the Sensex’s 64.22% was notable but overshadowed by recent weakness.

Daily Price Performance: Central Bank of India vs Sensex

Key Takeaways

Fundamental Strength: Central Bank of India continues to demonstrate strong fundamentals, including a record quarterly PAT of ₹1,262.60 crores and excellent asset quality metrics. Valuation remains attractive with a P/B ratio of 0.8 and PEG of 0.3, suggesting undervaluation relative to growth potential.

Technical Weakness: The stock’s technical indicators have shifted predominantly bearish, with daily moving averages, monthly MACD, and KST signalling downside momentum. The downgrade to a Sell rating by MarketsMOJO reflects this technical deterioration.

Price Underperformance: Despite fundamental strength, the stock declined 0.96% over the week, underperforming the Sensex’s 1.51% gain. The one-year price decline of 28.85% contrasts sharply with profit growth, indicating market scepticism.

Mixed Momentum Signals: Some weekly indicators such as MACD and OBV showed mild bullishness midweek, but monthly and daily trends remained bearish, suggesting a consolidation phase with downside risk.

Conclusion

Central Bank of India’s week was characterised by a complex interplay of strong fundamentals and weakening technical momentum. The downgrade to a Sell rating and bearish technical indicators highlight near-term risks, despite the bank’s solid profit growth and attractive valuation. The stock’s underperformance relative to the Sensex underscores market caution amid sectoral challenges and mixed momentum signals.

Investors should monitor key technical levels near ₹33 for support and watch for any sustained breakouts above resistance around ₹38 to confirm a reversal. Until clearer signals emerge, the stock remains in a cautious technical phase, balancing its fundamental strengths against prevailing market headwinds.

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