Why is Tarmat Ltd falling/rising?

Recent Price Performance and Market Context

Tarmat Ltd has experienced a notable underperformance relative to key benchmarks and its sector peers. Over the last week, the stock has declined by 8.05%, significantly outpacing the Sensex's modest 1.73% fall during the same period. This underperformance extends over longer horizons as well, with the stock down 6.10% in the past month compared to the Sensex's 3.24% decline. Year-to-date, Tarmat's shares have slipped 2.31%, slightly better than the Sensex's 3.57% fall, but the longer-term picture remains challenging. Over the past year, the stock has plummeted 27.03%, while the Sensex has gained 6.63%, highlighting a persistent weakness in Tarmat's share price relative to the broader market.

The stock's five-year performance further emphasises this trend, with a decline of 12.16% against the Sensex's robust 65.05% gain. Such sustained underperformance suggests structural challenges or investor concerns specific to Tarmat Ltd that have yet to be resolved.

Intraday and Technical Indicators Point to Weakness

On 20-Jan, Tarmat Ltd opened with a gap down of 3.05%, signalling immediate selling pressure from the outset of trading. The stock touched an intraday low of ₹49.10, marking a 3.54% decline by the close. This price action reflects a continuation of the stock's four-day losing streak, during which it has shed over 8% of its value.

Technically, the stock is trading below all major moving averages, including the 5-day, 20-day, 50-day, 100-day, and 200-day averages. This positioning typically indicates a bearish trend and suggests that short-term and long-term momentum remain weak. Such technical signals often deter new buying interest and can prompt existing investors to reduce exposure.

Sectoral Trends and Investor Participation

The Capital Goods sector, to which Tarmat Ltd belongs, has also been under pressure, declining by 2.43% on the same day. While this sectoral weakness partially explains the stock's decline, Tarmat's underperformance relative to its peers—falling 1.14% more than the sector average—indicates company-specific factors may be at play.

Investor participation appears to be waning as well. Delivery volume on 19 Jan was recorded at 6,880 shares, representing a sharp 90.17% drop compared to the five-day average delivery volume. This significant reduction in investor engagement suggests a lack of conviction or interest in the stock at current levels, which can exacerbate price declines due to thinner liquidity and reduced demand.

Despite the falling volumes, the stock remains sufficiently liquid for modest trade sizes, with a 2% threshold of the five-day average traded value supporting trades up to ₹0.01 crore. However, the diminished participation could signal hesitation among institutional and retail investors alike.

Investor Takeaway

The persistent decline in Tarmat Ltd's share price, coupled with its underperformance relative to the Sensex and the Capital Goods sector, highlights ongoing challenges for the company’s stock. The technical indicators and reduced investor participation reinforce a cautious outlook in the near term. Investors should be mindful of the stock’s weak momentum and sectoral headwinds when considering exposure.

While the stock remains liquid enough for trading, the lack of positive catalysts or strong buying interest suggests that the downtrend may continue until there is a clear improvement in fundamentals or sector conditions. Market participants may wish to monitor the stock closely for signs of stabilisation or reversal before committing fresh capital.

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 →