Why is Supreme Infra. falling/rising?

Short-Term Price Movement and Volatility

Despite the company’s challenging fundamentals, Supreme Infrastructure’s shares have shown a recent uptick, gaining 8.07% over the past two days. The stock opened with a gap up of 3% on 21-Nov and reached an intraday high of ₹89.14, reflecting strong buying interest early in the session. However, the stock also experienced significant volatility, trading within a wide range of ₹8.44 and touching a low of ₹80.70 during the day. This heightened intraday volatility of 5.55% indicates active trading and investor uncertainty, with the weighted average price suggesting that more volume was traded closer to the lower end of the range.

While the stock price is currently above its 5-day moving average, it remains below longer-term averages such as the 20-day, 50-day, 100-day, and 200-day moving averages. This technical positioning suggests that although there is some short-term momentum, the stock has yet to break through key resistance levels that would indicate a sustained recovery.

Long-Term Underperformance and Weak Fundamentals

Despite the recent price rise, Supreme Infrastructure has significantly underperformed the broader market over the last year and beyond. The stock has declined by 28.94% in the past 12 months, while the Sensex has gained 10.47% over the same period. Year-to-date, the stock is down 35.12%, contrasting sharply with the Sensex’s 9.08% rise. Even over the past month and week, the stock has posted losses of 14.29% and 5.85% respectively, while the benchmark indices have recorded modest gains.

Fundamentally, the company faces considerable challenges. It has reported negative results for three consecutive quarters, with quarterly net sales falling by nearly 50% to ₹8.32 crores compared to the previous four-quarter average. Profitability remains elusive, as reflected in a quarterly PAT loss of ₹399.91 crores, which has worsened by 12.3% relative to recent quarters. The company’s return on capital employed (ROCE) is extremely low at 1.18%, underscoring weak operational efficiency.

Moreover, Supreme Infrastructure’s long-term growth prospects appear bleak. Over the past five years, net sales have declined at an annualised rate of 25.81%, while operating profit has stagnated at zero growth. The company also carries a negative book value, signalling weak long-term financial health. Although the average debt-to-equity ratio is reported as zero, the high proportion of promoter shares pledged—standing at 63.87% and having increased by 47.57% in the last quarter—adds to the risk profile and could exert downward pressure on the stock in volatile markets.

Investor Participation and Liquidity Considerations

Investor participation appears to be waning, with delivery volumes on 20 Nov falling by 47.1% compared to the five-day average. This decline in investor engagement may reflect caution given the company’s recent financial performance and elevated risk. Nevertheless, liquidity remains adequate for trading, with the stock able to support sizeable trade volumes without significant price disruption.

Conclusion: Temporary Price Rise Amid Structural Weakness

The recent rise in Supreme Infrastructure’s share price on 21-Nov appears to be a short-term rebound rather than a sign of fundamental recovery. The stock’s outperformance relative to its sector by 6.05% today and the two-day consecutive gains suggest some renewed investor interest or speculative buying. However, the company’s persistent negative earnings, declining sales, weak return ratios, and high promoter share pledging continue to weigh heavily on its outlook.

Investors should remain cautious, as the stock’s long-term underperformance and financial fragility present significant risks. While the current price movement may offer trading opportunities, a sustained turnaround would require meaningful improvements in operational performance and financial health.

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