Why is Exide Inds. falling/rising?

Recent Price Movement and Market Context

Exide Industries has recorded a four-day consecutive gain, accumulating a 5.05% return over this period. This recent momentum outpaces the broader sector, with the stock outperforming its peers by 1.52% on the day. Over the past week, the stock has appreciated by 4.54%, significantly ahead of the Sensex’s 0.87% rise, signalling short-term investor interest despite a subdued one-month performance where the stock declined marginally by 0.52% against the Sensex’s 2.03% gain.

However, the stock’s year-to-date (YTD) and one-year returns remain negative at -8.84% and -16.07% respectively, underperforming the Sensex which has delivered 9.60% and 7.32% returns over the same periods. This divergence underscores the stock’s recent recovery as a short-term phenomenon rather than a reversal of its longer-term downtrend.

Technical Indicators and Trading Activity

Technically, Exide’s share price currently trades above its 5-day and 20-day moving averages, suggesting positive short-term momentum. However, it remains below the 50-day, 100-day, and 200-day moving averages, indicating that the longer-term trend is still under pressure. Liquidity remains adequate, with the stock supporting a trade size of approximately ₹1.67 crore based on recent average traded values.

Notably, investor participation has declined, with delivery volumes on 28 Nov falling by over 53% compared to the five-day average. This drop in volume may reflect cautious sentiment or profit-taking by some investors despite the price gains.

Fundamental Strengths Supporting the Stock

Exide Industries benefits from a robust market position, being the largest company in its sector with a market capitalisation of ₹31,832 crore, representing 40.86% of the sector’s total market cap. Its annual sales of ₹17,411.77 crore account for nearly half (49.83%) of the industry’s revenue, underscoring its dominant footprint.

The company maintains a conservative capital structure, with a low average debt-to-equity ratio of 0.03 times, which reduces financial risk and enhances stability. Institutional investors hold a significant 29.34% stake, reflecting confidence from sophisticated market participants who typically conduct thorough fundamental analysis.

Challenges Tempering Investor Optimism

Despite these positives, Exide’s long-term growth trajectory has been modest. Over the past five years, net sales have grown at an annualised rate of just 5.12%, while operating profit has increased by 7.92% annually. These figures suggest limited expansion relative to broader market expectations.

The company’s recent quarterly results released in September 2025 further dampen enthusiasm. Return on capital employed (ROCE) for the half-year stood at a low 8.11%, while profit after tax (PAT) for the quarter declined by 18.9% compared to the previous four-quarter average, amounting to ₹171.94 crore. Operating profit before depreciation, interest and taxes (PBDIT) also hit a low of ₹391.42 crore, signalling operational pressures.

Valuation metrics add to concerns. With a return on equity (ROE) of 5.4 and a price-to-book value of 2.2, the stock trades at a premium relative to its peers’ historical averages. This premium is notable given the company’s underperformance over the past year, where it has delivered a negative 16.07% return while profits have fallen by 5.7%. The stock’s underperformance is stark when compared to the BSE500 index, which has generated a positive 5.03% return over the same period.

Conclusion: Why the Stock Is Rising Despite Headwinds

The recent rise in Exide Industries’ share price on 01-Dec can be attributed primarily to short-term technical momentum and sector outperformance rather than a fundamental turnaround. The stock’s gains over the past week and the last four days reflect renewed investor interest, possibly driven by its dominant market position, low leverage, and strong institutional backing.

However, the company’s subdued long-term growth, weak recent quarterly results, and expensive valuation relative to peers continue to weigh on sentiment. The decline in delivery volumes suggests that the rally may be driven by selective buying rather than broad-based investor conviction.

Investors should weigh the short-term price momentum against the company’s fundamental challenges and valuation premium before making investment decisions. While the stock shows signs of technical strength, its longer-term prospects remain constrained by modest growth and profitability concerns.

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