Tata Communications Ltd Forms Death Cross Signalling Bearish Trend

Understanding the Death Cross and Its Implications

The Death Cross is widely regarded by technical analysts as a significant bearish signal. It occurs when the short-term 50-day moving average, which tracks recent price trends, falls below the longer-term 200-day moving average, indicating that recent price action is weaker relative to the longer-term trend. For Tata Communications Ltd, this crossover suggests that the stock’s upward momentum has faltered and that sellers may be gaining control.

This technical event often precedes extended downtrends or periods of consolidation, as it reflects a shift in investor sentiment from optimism to caution or pessimism. While not a guarantee of future declines, the Death Cross is a warning sign that the stock’s trend has weakened materially and that further downside risk cannot be discounted.

Recent Price and Performance Trends

Tata Communications Ltd’s recent price action corroborates the bearish technical signal. The stock recorded a day change of -1.96%, underperforming the Sensex’s positive 0.79% move on the same day. Over the past month, the stock has declined by 7.44%, significantly worse than the Sensex’s modest 0.35% fall. The three-month performance is even more concerning, with a 13.42% drop compared to the Sensex’s 1.52% decline.

Year-to-date, Tata Communications Ltd has lost 11.07%, far exceeding the Sensex’s 2.28% fall, indicating sustained pressure on the stock. Although the company’s one-year return of 8.24% remains positive, it lags behind the Sensex’s 9.66% gain, signalling relative underperformance within the broader market context.

Valuation and Market Capitalisation Context

With a market capitalisation of ₹46,647 crores, Tata Communications Ltd is classified as a mid-cap stock within the Telecom - Services sector. Its price-to-earnings (P/E) ratio stands at 39.01, slightly above the industry average of 37.78, suggesting that the stock is valued at a premium relative to its peers. This premium valuation may be challenged if the bearish technical signals translate into weaker earnings momentum or investor sentiment.

Technical Indicators Confirm Bearish Momentum

Additional technical metrics reinforce the bearish outlook. The daily moving averages are firmly bearish, consistent with the Death Cross formation. The weekly Moving Average Convergence Divergence (MACD) indicator is also bearish, signalling downward momentum, while the monthly MACD is mildly bearish, suggesting some caution in the longer-term trend.

Bollinger Bands on the weekly chart indicate bearish pressure, with the stock price trending towards the lower band, a sign of increased volatility and selling pressure. The monthly Bollinger Bands are mildly bearish, reflecting a cautious medium-term outlook.

Other indicators such as the Relative Strength Index (RSI) on weekly and monthly timeframes show no clear signal, indicating the stock is neither oversold nor overbought at present. The KST (Know Sure Thing) indicator presents a mixed picture: bearish on the weekly chart but mildly bullish on the monthly, suggesting some underlying strength that may temper the decline but is insufficient to reverse the negative trend currently.

Long-Term Performance and Sector Comparison

Despite recent weakness, Tata Communications Ltd has delivered strong long-term returns. Over the past decade, the stock has appreciated by 362.39%, outperforming the Sensex’s 259.08% gain. However, over shorter horizons such as three and five years, the stock has underperformed the benchmark, with returns of 29.30% and 54.42% respectively, compared to the Sensex’s 35.81% and 59.83%.

This divergence highlights a recent trend deterioration, where the stock’s momentum has slowed relative to the broader market and its sector peers. The telecom services sector itself faces challenges from regulatory pressures, competitive intensity, and evolving technology demands, which may be contributing to Tata Communications Ltd’s recent struggles.

Mojo Score and Rating Update

MarketsMOJO assigns Tata Communications Ltd a Mojo Score of 65.0, reflecting a Hold rating. This represents a downgrade from a previous Buy rating as of 04 August 2025, signalling a more cautious stance by analysts. The downgrade aligns with the technical deterioration and relative underperformance observed in recent months.

The company’s Market Cap Grade is 2, indicating a mid-cap classification with moderate liquidity and market presence. Investors should weigh the Hold rating alongside the bearish technical signals and sector challenges when considering their exposure to this stock.

Outlook and Investor Considerations

The formation of the Death Cross in Tata Communications Ltd’s price chart is a clear warning of potential further downside or at least a period of consolidation. While the company’s long-term fundamentals and historical returns remain robust, the recent trend deterioration and technical weakness suggest investors should exercise caution.

Given the stock’s premium valuation relative to the industry and the ongoing sector headwinds, the risk-reward balance appears tilted towards downside risk in the near to medium term. Investors may consider monitoring key support levels and broader market conditions before increasing exposure.

Conversely, long-term investors with a higher risk tolerance might view the current weakness as a potential entry point, provided they are comfortable with the telecom sector’s cyclicality and Tata Communications Ltd’s strategic positioning.

Conclusion

Tata Communications Ltd’s recent Death Cross formation marks a significant technical shift, signalling a potential bearish trend and trend deterioration. Coupled with underwhelming recent performance relative to the Sensex and a downgrade to Hold by MarketsMOJO, the stock faces near-term headwinds. Investors should carefully analyse these signals in conjunction with fundamental factors and sector dynamics before making investment decisions.

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