Why is Majestic Auto falling/rising?

Recent Price Movement and Market Context

Majestic Auto’s share price has underperformed relative to its sector and the broader market indices over recent periods. In the past week, the stock declined by 2.73%, significantly lagging the Sensex’s modest 0.40% fall. Over the last month, the stock’s loss widened to 6.46%, while the Sensex remained nearly flat with a 0.23% dip. Year-to-date, the divergence is even more pronounced, with Majestic Auto down 23.52% compared to the Sensex’s 8.12% gain. This underperformance extends to the one-year horizon, where the stock has fallen 21.78% against the Sensex’s 5.36% rise.

Despite this recent weakness, the stock’s longer-term performance remains robust, having delivered a 152.65% return over three years and 157.43% over five years, comfortably outpacing the Sensex’s respective gains of 37.73% and 79.90%. This suggests that while the stock has faced short-term pressures, its underlying growth trajectory over the medium to long term has been strong.

Intraday Price Action and Technical Indicators

On 18-Dec, the stock touched an intraday low of ₹321, representing a 3.31% decline from previous levels. The weighted average price indicates that a greater volume of shares traded closer to this low price, signalling selling pressure during the session. This price action marks a clear trend reversal following two days of gains, suggesting that short-term traders may be booking profits or reacting to broader market cues.

From a technical standpoint, Majestic Auto’s current price remains above its 200-day moving average, a long-term support indicator. However, it is trading below its 5-day, 20-day, 50-day, and 100-day moving averages, which points to short- and medium-term weakness. This mixed technical picture often indicates consolidation or a potential correction phase before any sustained recovery.

Investor Participation and Liquidity Considerations

Investor participation appears to be waning, as evidenced by a 12.97% decline in delivery volume on 17-Dec compared to the five-day average. Lower delivery volumes typically reflect reduced conviction among investors, which can exacerbate price declines when selling pressure emerges. Despite this, the stock remains sufficiently liquid, with trading volumes supporting sizeable transactions without significant price disruption.

Interestingly, Majestic Auto offers a relatively high dividend yield of 3.01% at the current price level, which may provide some cushion for investors seeking income amid price volatility. However, this yield has not been enough to offset the recent negative sentiment driving the share price lower.

Conclusion: Factors Driving the Decline

In summary, Majestic Auto’s share price decline on 18-Dec is primarily driven by a combination of technical resistance, reduced investor participation, and broader underperformance relative to market benchmarks. The stock’s failure to sustain gains after two positive sessions, coupled with trading volumes concentrated near intraday lows, highlights cautious sentiment among traders and investors. While the company’s long-term performance remains impressive and its dividend yield attractive, short-term pressures have weighed on the stock’s price momentum.

Investors should monitor whether the stock can regain footing above its shorter-term moving averages and whether delivery volumes pick up, signalling renewed buying interest. Until then, the current environment suggests a cautious approach given the prevailing technical and participation challenges.

Get 2 full years of MojoOne Premium for only Rs. 12,999. Subscribe for 1 year and we'll add another year FREE. Offer valid for a limited time. Start Saving Now →