Equitas Small Finance Bank Gains 3.54%: 3 Key Factors Driving the Week’s Momentum

29 December 2025: Upgrade to Hold Reflects Technical and Valuation Nuances

On 29 December, Equitas Small Finance Bank’s rating was upgraded from Sell to Hold by MarketsMOJO, reflecting a subtle improvement in technical indicators despite ongoing financial challenges. The stock closed at Rs.61.35, down 0.92% on the day, while the Sensex declined 0.41%. This upgrade was driven by a shift in weekly technical momentum from mildly bearish to mildly bullish, supported by positive signals from MACD, Bollinger Bands, and the Know Sure Thing oscillator on weekly charts.

However, monthly technicals remained mixed, with bearish MACD and Bollinger Bands, and neutral RSI readings, indicating uncertainty in the medium term. Valuation concerns persisted as the stock traded at a negative price-to-earnings ratio of -76.87 and a price-to-book value of 1.20, signalling an expensive premium despite weak fundamentals. The bank’s profitability metrics remained under pressure, with negative return on equity and assets, and elevated net non-performing assets to book value ratio of 6.11%.

Institutional holdings remained robust at 63.87%, suggesting some confidence among sophisticated investors. The upgrade to Hold thus reflected cautious optimism amid financial stress and valuation challenges.

Technical Momentum Shows Mixed Signals Amid Mildly Bullish Trend

The same day, detailed technical analysis highlighted a nuanced shift in momentum. Despite the stock’s slight decline to Rs.61.46 (down 0.31% from previous close), weekly MACD and Bollinger Bands turned mildly bullish, while monthly indicators remained bearish. The Relative Strength Index hovered neutrally, indicating no immediate overbought or oversold conditions.

Daily moving averages were bullish, suggesting short-term upward momentum, supported by mildly bullish On-Balance Volume readings. Dow Theory assessments were split, mildly bearish weekly but mildly bullish monthly, underscoring the stock’s transitional phase. This mixed technical picture suggested opportunities for short-term traders but advised caution for longer-term investors.

Comparatively, the stock outperformed the Sensex over the week with a 4.47% gain versus the benchmark’s 0.13%, though it lagged over the month and year-to-date periods. The MarketsMOJO Mojo Score was upgraded to 51.0, reflecting a Hold rating and signalling improved but cautious market sentiment.

31 December 2025 to 2 January 2026: Price Recovery and Valuation Concerns Intensify

From 31 December onwards, Equitas Small Finance Bank’s stock price rebounded strongly. On 31 December, it surged 3.18% to Rs.62.96, outpacing the Sensex’s 0.83% gain. The positive momentum continued into the new year, with the stock rising 1.54% on 1 January to Rs.63.93 and a further 0.28% on 2 January to close at Rs.64.11. These gains contrasted with the Sensex’s more modest advances of 0.14% and 0.81% respectively.

However, on 2 January, a valuation reassessment downgraded the stock’s valuation grade from expensive to very expensive. The price-to-earnings ratio deteriorated further to -80.4, while the price-to-book value increased to 1.25, signalling a stretched premium relative to net asset value. Profitability metrics remained negative, with ROE at -1.56% and ROA at -0.16%, while asset quality concerns persisted with a net NPA to book value ratio of 6.11%.

This valuation shift highlighted heightened price risk amid mixed fundamentals, despite the stock’s short-term resilience. Compared to peers such as Karur Vysya Bank and Bandhan Bank, which trade at more reasonable multiples and maintain positive earnings, Equitas’s premium valuation appeared less justified by current financial performance.

Daily Price Performance vs Sensex

Key Takeaways

Positive Signals: The upgrade to Hold and mildly bullish weekly technical indicators suggest emerging momentum. The stock outperformed the Sensex over the week, gaining 3.54% versus the benchmark’s 1.35%, supported by increased volumes and short-term price strength.

Cautionary Factors: Valuation metrics have deteriorated, with the stock now rated very expensive amid negative earnings and elevated asset quality risks. Monthly technical indicators remain bearish, and profitability metrics continue to reflect operational challenges. The premium valuation demands clear evidence of turnaround to justify further gains.

Market Context: Institutional holdings remain high, indicating some confidence in the bank’s prospects despite financial headwinds. However, the stock’s longer-term underperformance relative to the Sensex and peers highlights ongoing challenges in delivering sustained shareholder value.

Conclusion

Equitas Small Finance Bank Ltd’s week was characterised by a cautious shift towards optimism, driven by improved technical momentum and a rating upgrade to Hold. The stock’s 3.54% weekly gain outpaced the Sensex, reflecting short-term strength. However, the valuation shift to very expensive amid negative profitability and asset quality concerns tempers enthusiasm. Investors should monitor upcoming financial results and technical developments closely, as the stock’s premium pricing requires clear fundamental improvement to sustain gains. For now, the outlook remains balanced between emerging positive signals and persistent risks.

Only Rs. 9,999 - Get MojoOne + Stock of the Week for 1 Year (MRP = Rs. 34,999) Start Saving Now →