Why is Redington falling/rising?

Market Performance and Sector Influence

Redington’s share price fell by Rs 10.10 on 05-Dec, touching an intraday low of Rs 266.55, a decline of 4.33%. This underperformance was in line with the broader IT - Hardware sector, which itself declined by 2.68% on the same day. The stock’s daily performance lagged the sector by 0.77%, indicating that sector-wide weakness has contributed to the downward pressure on Redington’s shares.

Moreover, the weighted average price for the day showed that a greater volume of shares traded near the lower price levels, signalling selling pressure. The stock’s moving averages reveal a mixed technical picture: while it remains above its 200-day moving average, it is trading below its 5-day, 20-day, 50-day, and 100-day moving averages, suggesting short-term bearish momentum despite longer-term support.

Investor Participation and Liquidity Trends

Investor participation appears to be waning, as evidenced by a significant 42.05% drop in delivery volume on 04 Dec compared to the five-day average. The delivery volume stood at 5.37 lakh shares, indicating reduced conviction among investors to hold the stock. This decline in participation may have exacerbated the price decline, as lower demand can amplify downward price movements.

Despite this, liquidity remains adequate for sizeable trades, with the stock’s liquidity supporting trade sizes of approximately Rs 1.18 crore based on 2% of the five-day average traded value. This ensures that institutional investors can still transact without excessive price impact, although the current trend suggests caution among market participants.

Strong Long-Term Fundamentals Support Valuation

Despite the recent dip, Redington’s long-term fundamentals remain robust. The company has demonstrated healthy growth with net sales increasing at an annual rate of 15.82% and operating profit growing at 17.22%. Its low average debt-to-equity ratio of 0.09 times underscores a conservative capital structure, reducing financial risk.

Return on Capital Employed (ROCE) averages 32.56%, indicating efficient utilisation of capital to generate profits. Currently, the company’s ROCE stands at 19.1, paired with an attractive enterprise value to capital employed ratio of 2.2, suggesting the stock is trading at a discount relative to its peers’ historical valuations.

Over the past year, Redington has delivered a 30.06% return to shareholders, significantly outperforming the Sensex’s 4.83% gain. Year-to-date, the stock has risen 34.35%, well ahead of the benchmark’s 9.69%. This market-beating performance extends over three and five-year periods as well, with returns of 49.08% and 296.60% respectively, compared to Sensex gains of 36.41% and 90.14% over the same durations.

Institutional investors hold a substantial 78.83% stake in the company, reflecting confidence from sophisticated market participants who typically conduct thorough fundamental analysis before committing capital.

Risks and Near-Term Challenges

However, some risks remain. The company reported flat results in September 2025, which may have tempered investor enthusiasm. Additionally, the dividend payout ratio is relatively low at 36.82%, potentially limiting income appeal for dividend-focused investors. The debtors turnover ratio at half-year stands at 0.57 times, indicating slower collection efficiency, which could impact working capital management.

These factors, combined with the sector’s current weakness and reduced investor participation, have likely contributed to the short-term decline in Redington’s share price despite its strong underlying fundamentals.

Conclusion: Navigating Short-Term Volatility Amid Strong Fundamentals

In summary, Redington Ltd’s share price decline on 05-Dec can be attributed primarily to sector-wide weakness in IT hardware stocks, diminished investor participation, and some near-term operational concerns. Nevertheless, the company’s strong long-term growth trajectory, conservative debt profile, and superior returns relative to benchmarks provide a solid foundation for investors considering a longer-term perspective.

Market participants should weigh these short-term headwinds against the company’s attractive valuation and institutional backing when making investment decisions. The current dip may present an opportunity for investors who prioritise fundamental strength and market leadership in the trading and distribution sector.

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 →