Why is Star Health & Allied Insurance Company Ltd falling/rising?

Recent Price Movement and Market Performance

The stock has experienced a notable decline over the past week, losing 4.61% compared to a marginal 0.13% gain in the Sensex. This marks the fourth consecutive day of losses, with the share price touching an intraday low of ₹442.50, down 2.44% on the day. Over the last month, the stock has declined by 9.49%, significantly underperforming the broader market, which fell by only 0.66% during the same period. Year-to-date, Star Health’s shares have dropped 6.53%, while the Sensex has gained 8.83%, highlighting the stock’s persistent weakness.

Despite trading above its 200-day moving average, the stock remains below its 5-day, 20-day, 50-day, and 100-day moving averages, signalling short- to medium-term bearish momentum. Interestingly, investor participation has increased, with delivery volumes on 24 Dec rising by over 109% compared to the five-day average, indicating heightened trading activity amid the decline. Liquidity remains adequate, supporting moderate trade sizes without significant price disruption.

Fundamental Challenges Weighing on the Stock

While Star Health boasts a strong long-term fundamental strength with a compound annual growth rate (CAGR) of 19.34% in operating profits, this positive aspect is overshadowed by significant weaknesses in other key financial metrics. The company’s net sales have declined at an alarming annual rate of 50.25%, signalling deteriorating top-line performance. This contraction in sales is a critical concern for investors, as it directly impacts the company’s ability to generate sustainable earnings growth.

The most recent quarterly results for September 2025 further exacerbate concerns. Profit before tax (PBT) excluding other income stood at ₹74.56 crore, down 61.6% compared to the average of the previous four quarters. Similarly, profit after tax (PAT) plunged 62.7% to ₹54.90 crore over the same period. These steep declines in profitability metrics have eroded investor confidence and contributed to the stock’s downward trajectory.

Valuation and Return Metrics

Star Health’s valuation appears stretched relative to its financial performance. The company’s return on equity (ROE) is modest at 7.2%, yet it trades at a price-to-book (P/B) ratio of 3.5, indicating a premium valuation compared to peers. This premium is difficult to justify given the company’s recent profit declines and lacklustre sales growth. Over the past year, the stock has delivered a negative return of 8.89%, while profits have contracted by 38.2%, underscoring the disconnect between valuation and earnings performance.

Consistent Underperformance Against Benchmarks

Over the last three years, Star Health has consistently underperformed the benchmark indices. The stock’s three-year return of -22.14% starkly contrasts with the Sensex’s robust 40.41% gain over the same period. This persistent underperformance extends to the BSE500 index, where the stock has lagged in each of the past three annual periods. Such sustained relative weakness raises questions about the company’s competitive positioning and growth prospects within the insurance sector.

Despite these challenges, the company benefits from a relatively high institutional holding of 34.59%, suggesting that sophisticated investors continue to monitor the stock closely. Institutional investors typically possess greater resources to analyse fundamentals, which may provide some support to the share price during periods of volatility.

Conclusion: Why the Stock Is Falling

Star Health & Allied Insurance’s share price decline on 26-Dec and over recent periods can be attributed primarily to its disappointing financial performance, characterised by sharply falling net sales and profits. The company’s inability to sustain growth in top-line revenues, coupled with a significant drop in quarterly profitability, has undermined investor confidence. Additionally, the stock’s expensive valuation relative to its modest ROE and persistent underperformance against market benchmarks has further dampened enthusiasm among investors.

While the company’s strong operating profit growth and institutional backing offer some positive signals, these factors have not been sufficient to offset concerns about deteriorating fundamentals and valuation risks. As a result, the stock continues to face selling pressure, reflected in its recent price weakness and underwhelming returns compared to the broader market.

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