Why is Explicit Finance Ltd falling/rising?

Recent Price Performance and Market Context

Explicit Finance Ltd has experienced a pronounced downturn in recent weeks. Over the past week, the stock has declined by 17.92%, a stark contrast to the Sensex’s modest 0.75% fall during the same period. This negative trend extends over the last month, with the stock plunging 33.14%, while the Sensex dipped only 1.98%. Year-to-date, the stock’s performance remains weak, down 33.58%, compared to the Sensex’s 2.32% decline. Despite this recent weakness, the stock has delivered strong long-term returns, rising 30.86% over the past year and an impressive 506.62% over five years, far outpacing the Sensex’s respective gains of 8.65% and 68.52%.

Technical Indicators and Trading Patterns

The stock’s technical indicators paint a bearish picture. Explicit Finance is trading below all key moving averages, including the 5-day, 20-day, 50-day, 100-day, and 200-day averages, signalling sustained downward momentum. This technical weakness is compounded by the stock’s erratic trading pattern, having missed trading on one day in the last 20 sessions, which may reflect intermittent liquidity or investor hesitation.

Moreover, the stock has been on a consecutive five-day losing streak, shedding 21.98% in that span alone. This persistent decline suggests that investor sentiment remains subdued, with sellers dominating the market. The stock’s underperformance is further highlighted by its 5.22% lag behind its sector peers on the day of the latest price drop, indicating relative weakness within its industry group.

Investor Participation and Liquidity Considerations

Interestingly, despite the downward price trend, investor participation has shown signs of increasing. Delivery volume on 16 Jan surged by 49.87% compared to the five-day average, reaching 952 shares. This rise in delivery volume suggests that more investors are taking positions or closing out holdings, reflecting heightened trading interest amid the volatility. However, liquidity remains a concern, as the stock’s tradable value based on 2% of the five-day average traded value is effectively zero, indicating limited capacity for large trades without impacting the price.

Balancing Long-Term Strength Against Short-Term Weakness

While the recent price action is decidedly negative, it is important to contextualise this within the stock’s longer-term performance. Explicit Finance Ltd has delivered exceptional returns over the past five years, outperforming the Sensex by a wide margin. This suggests that the current weakness may be a correction or consolidation phase rather than a fundamental deterioration. Nonetheless, the steep declines over the past month and the ongoing underperformance relative to both the benchmark and sector peers warrant caution for investors considering new positions.

Conclusion: Why Explicit Finance Ltd Is Falling

The decline in Explicit Finance Ltd’s share price as of 19-Jan is primarily driven by a combination of sustained selling pressure, technical weakness, and underperformance relative to both the Sensex and its sector. The stock’s failure to hold above key moving averages and its consecutive days of losses underscore a bearish market sentiment. Although rising delivery volumes indicate increased investor activity, the lack of liquidity and erratic trading patterns add to the uncertainty. Investors should weigh the recent sharp declines against the company’s strong historical returns and consider broader market conditions before making investment decisions.

Limited Time Only! Subscribe for Rs. 12,999 and get 1 Year of MojoOne + an Additional Year Completely FREE. Don't miss out on this exclusive offer. Claim Your Free Year →