Why is Centrum Capital falling/rising?

Recent Price Performance and Market Context

Centrum Capital’s stock has underperformed significantly compared to the broader market benchmarks. Over the last week, the stock has declined by 10.95%, while the Sensex remained virtually flat with a marginal 0.06% gain. This underperformance extends over longer periods as well, with the stock down 12.06% in the past month and 10.62% over the last year, contrasting sharply with the Sensex’s 7.31% gain during the same timeframe. Even over three and five years, Centrum Capital’s returns of 18.99% and 75.30% respectively lag behind the Sensex’s 36.34% and 90.69% gains, highlighting persistent underperformance.

On the day of the decline, the stock exhibited high volatility, trading within a wide range of ₹3.62 and touching an intraday low of ₹29.19, nearly 10% below the previous close. The weighted average price indicated that most trading volume occurred near the day’s low, signalling selling pressure. Additionally, the stock is trading below all key moving averages—5-day, 20-day, 50-day, 100-day, and 200-day—further underscoring bearish momentum.

Fundamental Weaknesses Weighing on Investor Sentiment

The primary driver behind Centrum Capital’s share price decline is its deteriorating financial health. The company reported flat results for the quarter ended September 2025, with a net loss after tax (PAT) of ₹40.65 crores, representing a steep 47.5% drop compared to the average of the previous four quarters. Net sales also contracted by 9.2% to ₹822.94 crores, while profit before depreciation, interest, and taxes (PBDIT) hit a low of ₹175.64 crores. These figures indicate a weakening operational performance that has failed to inspire investor confidence.

Moreover, Centrum Capital’s long-term return on equity (ROE) remains at a concerning zero percent on average, with the latest quarter showing a negative ROE of -28.2%. This poor profitability metric is compounded by the stock’s expensive valuation, trading at a price-to-book value of 3, which is high relative to its peers’ historical averages. Despite a 9.6% rise in profits over the past year, the stock’s negative total returns suggest that investors are sceptical about the sustainability of these gains.

Promoter Share Pledging Adds to Downward Pressure

Another significant factor contributing to the stock’s decline is the high level of promoter share pledging. Nearly half (49.9%) of promoter holdings are pledged, and this proportion has increased by 2.99% over the last quarter. In volatile or falling markets, elevated pledged shares often exacerbate selling pressure as lenders may enforce margin calls, forcing promoters to liquidate shares. This dynamic can accelerate downward price movements and deter new investors from entering the stock.

Investor participation has also waned recently, with delivery volumes falling by 18.86% compared to the five-day average, indicating reduced buying interest. Although the stock remains sufficiently liquid for modest trade sizes, the combination of weak fundamentals, high valuation, and promoter pledging has created a challenging environment for the share price.

Conclusion: Why Centrum Capital Is Falling

In summary, Centrum Capital’s recent share price decline is a reflection of multiple adverse factors converging simultaneously. The company’s disappointing quarterly results, characterised by shrinking sales and widening losses, have undermined investor confidence. Its weak long-term profitability metrics and expensive valuation relative to peers further discourage buying interest. The substantial proportion of pledged promoter shares adds an additional layer of risk, particularly in a falling market environment, amplifying selling pressure.

Given these challenges, the stock has underperformed not only in the short term but also over several years when compared to major indices like the Sensex and the BSE500. The current technical indicators, including trading below all major moving averages and declining investor participation, suggest that the downtrend may persist until there is a meaningful improvement in fundamentals or a reduction in promoter pledging.

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