Why is COSCO (India) Ltd falling/rising?

Intraday Price Movement and Volatility

The stock opened with a notable gap up of 4.9%, signalling early bullish sentiment among traders. Throughout the day, COSCO demonstrated high volatility, with an intraday price range of ₹30.6 and a peak price touching ₹258.75, representing an 18.97% increase from the previous close. Despite this wide trading band, the weighted average price indicated that a larger volume of shares exchanged hands closer to the lower end of the range, suggesting some profit-taking or cautious positioning by investors amid the volatility.

Moving averages provide further context to the stock's technical positioning. COSCO's current price is above its 5-day, 20-day, 50-day, and 100-day moving averages, reflecting short to medium-term upward momentum. However, it remains below the 200-day moving average, indicating that the longer-term trend may still be under pressure. This mixed technical picture could explain the heightened volatility and investor caution despite the strong price gains.

Relative Performance Against Benchmarks

COSCO's recent price surge contrasts sharply with the broader market trends. Over the past week, the stock has gained 8.80%, while the Sensex declined by 1.00%. Similarly, over the last month and year-to-date periods, COSCO has posted positive returns of 6.84% and 6.53% respectively, whereas the Sensex has fallen by 4.67% and 5.28% in the same intervals. This outperformance highlights a short-term investor preference for COSCO despite its longer-term challenges.

However, the stock's longer-term performance remains subdued. Over the past year, COSCO has delivered a negative return of 14.29%, underperforming the Sensex, which gained 5.16%. Even over three years, COSCO's 28.29% gain trails the Sensex's 35.67%. Nonetheless, the five-year return of 154.84% significantly outpaces the benchmark's 74.40%, indicating that the company has delivered substantial value over a longer horizon despite recent setbacks.

Fundamental Factors and Valuation

From a fundamental perspective, COSCO presents a mixed picture. The company’s return on capital employed (ROCE) stands at 2.2%, suggesting fair valuation metrics, especially given its enterprise value to capital employed ratio of 1.4. The stock is trading at a discount relative to its peers’ historical valuations, which may attract value-oriented investors seeking opportunities amid broader sector weakness.

Despite this, the company faces significant operational challenges. Over the past year, profits have declined sharply by 149.1%, reflecting deteriorating earnings quality. The latest quarterly results for September 2025 reveal a steep fall in profitability, with profit before tax excluding other income plunging by 2600% to a loss of ₹1.89 crore, and net profit after tax dropping by 2760% to a loss of ₹1.43 crore. Net sales also contracted by 14.9% compared to the previous four-quarter average, underscoring weakening revenue streams.

Moreover, COSCO’s financial health is strained by a high debt burden, with a debt-to-EBITDA ratio of 7.17 times, indicating limited capacity to service debt obligations. The company’s average return on equity of 4.70% further signals low profitability relative to shareholders’ funds, which may weigh on investor confidence in the long term.

Investor Participation and Liquidity

Investor participation appears to be waning despite the price rally. Delivery volume on 30 January was 316, down 13.14% from the five-day average, suggesting that fewer investors are holding shares for the long term. Nevertheless, liquidity remains adequate, with the stock able to support sizeable trade volumes based on 2% of the five-day average traded value, facilitating active trading without excessive price impact.

Conclusion: Why COSCO is Rising Despite Fundamental Concerns

The sharp rise in COSCO (India) Ltd’s share price on 01-Feb can be attributed primarily to short-term technical factors and relative sector outperformance rather than a turnaround in fundamentals. The stock’s gap-up opening, strong intraday highs, and outperformance against the Sensex and sector indices have attracted momentum-driven buying. However, the underlying financials remain weak, with significant operating losses, declining profits, and high leverage continuing to pose risks.

Investors appear to be capitalising on the stock’s discounted valuation and short-term price momentum, possibly anticipating a recovery or value realisation. Yet, the falling investor participation and persistent fundamental challenges suggest caution. For long-term investors, the company’s weak profitability and debt profile remain critical considerations despite the recent price surge.

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