Why is Zenith Steel falling/rising?

Short-Term Performance Lagging Behind Benchmarks

Zenith Steel’s recent returns reveal a challenging period for investors. Over the past week, the stock has declined by 4.69%, significantly underperforming the Sensex, which recorded a modest fall of 0.52% during the same timeframe. The one-month performance further emphasises this weakness, with Zenith Steel dropping 9.31%, while the Sensex gained 1.13%. Year-to-date figures also highlight the stock’s struggles, showing a decline of 8.97% compared to the Sensex’s robust 8.55% gain. Over the last year, the stock has fallen 17.49%, whereas the Sensex has managed a positive return of 4.04%.

These figures indicate that Zenith Steel has been unable to keep pace with the broader market and its sector peers, suggesting underlying challenges that have weighed on investor sentiment.

Technical Indicators Signal Continued Downtrend

From a technical perspective, Zenith Steel is currently trading below all key moving averages, including the 5-day, 20-day, 50-day, 100-day, and 200-day averages. This positioning typically signals a bearish trend, indicating that the stock has been under sustained selling pressure. The fact that the stock has been falling consecutively for two days, losing 2.79% in that period, reinforces the negative momentum.

Such technical weakness often deters short-term traders and can lead to further declines if not reversed by positive catalysts.

Investor Activity and Liquidity Considerations

Interestingly, despite the price decline, investor participation has increased. On 10 Dec, the delivery volume surged to 1.5 lakh shares, marking a 138.51% rise compared to the five-day average delivery volume. This heightened activity suggests that while some investors are offloading shares, others may be accumulating at lower levels, possibly anticipating a turnaround or valuing the stock at its current price.

Liquidity remains adequate, with the stock’s traded value supporting reasonable trade sizes, ensuring that investors can enter or exit positions without significant market impact.

Long-Term Perspective Remains Positive Despite Recent Weakness

While short-term performance has been disappointing, Zenith Steel’s longer-term returns paint a more encouraging picture. Over three years, the stock has delivered a 35.87% gain, closely tracking the Sensex’s 36.40% rise. More impressively, the five-year return stands at a remarkable 596.19%, vastly outperforming the Sensex’s 83.99% gain over the same period. This suggests that the company has demonstrated strong growth and value creation over the long haul, which may appeal to patient investors willing to weather near-term volatility.

However, the current technical and short-term fundamental signals indicate caution, as the stock faces downward pressure amid broader market and sector dynamics.

Conclusion: Why Zenith Steel Is Falling

In summary, Zenith Steel’s share price decline on 11-Dec is primarily driven by its underperformance relative to the Sensex and sector peers in recent weeks and months. The stock’s position below all major moving averages and consecutive days of losses highlight a technical downtrend that has likely discouraged buying interest. Although rising delivery volumes suggest some investor engagement, the prevailing sentiment remains cautious. The stock’s liquidity supports trading activity, but without positive catalysts or a reversal in momentum, the downward trend may persist in the near term.

Investors should weigh the stock’s strong long-term track record against its current challenges and consider alternative opportunities within the iron and steel sector that may offer more favourable risk-reward profiles.

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 →