Why is Muthoot Microfin Ltd falling/rising?

Robust Short-Term Gains and Market Outperformance

The stock has demonstrated impressive momentum over the past week, delivering a 9.28% return compared to the Sensex’s 2.94% gain. This outperformance extends to the one-month and year-to-date periods, where Muthoot Microfin has risen 4.62% and 7.30% respectively, while the Sensex has lagged behind with gains of just 0.59% and a decline of 1.36%. Over the last year, the stock’s 20.54% return significantly surpasses the broader market’s 7.97% increase, underscoring its strong relative strength.

On the day in question, the stock opened with a gap up of 2.02%, signalling early buying interest. It reached an intraday high of ₹189.35, marking a 4.7% increase from the previous close. The stock’s ability to trade above its 5-day, 20-day, 50-day, 100-day, and 200-day moving averages further confirms a sustained bullish trend. Despite a decline in delivery volume by 33.21% compared to the five-day average, the stock maintained liquidity sufficient for trades worth ₹0.04 crore, indicating steady investor participation.

Strong Fundamental Backing Despite Profitability Challenges

Muthoot Microfin’s rise is underpinned by solid long-term fundamentals, notably a compound annual growth rate (CAGR) of 45.40% in net sales. The company’s latest financial results for the quarter ended September 2025 reveal encouraging operational metrics. Operating cash flow reached a peak of ₹1,382.03 crore, while profit before tax excluding other income surged by 133.3% to ₹36.05 crore compared to the previous four-quarter average. Net profit after tax also grew impressively by 137.0% to ₹30.52 crore in the same period.

However, the company’s return on equity (ROE) remains negative at -13.3, reflecting ongoing challenges in profitability. Despite this, the stock trades at a reasonable valuation with a price-to-book ratio of 1.2, which is discounted relative to its peers’ historical averages. This valuation appeal, combined with the company’s growth trajectory, has attracted investor interest.

It is worth noting that while the stock has generated a strong 20.54% return over the past year, its profits have declined by 149%, highlighting a divergence between market performance and earnings. This contrast suggests that investors are currently prioritising growth potential and market positioning over immediate profitability.

Investor Sentiment and Market Positioning

The recent consecutive gains over two days, amounting to a 5.97% return, reflect growing investor confidence in Muthoot Microfin’s prospects. The stock’s ability to outperform its sector by 3.18% on the day further emphasises its relative strength within the microfinance and financial services space. Trading above all major moving averages signals a positive technical outlook, which often attracts momentum-driven investors.

While the weighted average price indicates that more volume was traded near the lower end of the day’s price range, the overall trend remains upward. This suggests some cautious profit-taking but no significant selling pressure. The stock’s liquidity profile supports continued active trading, which is essential for sustaining price momentum.

In summary, Muthoot Microfin Ltd’s share price rise on 09-Feb is driven by a combination of strong recent returns, robust long-term sales growth, encouraging quarterly financial results, and favourable technical indicators. Although profitability metrics remain a concern, the stock’s attractive valuation and market-beating performance have bolstered investor sentiment, resulting in the current upward trajectory.

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