In the world of stock trading, every shift in a stock’s status—whether it’s a market ban or a sudden surge—captures the attention of investors. One such event that recently caught the eye of investors was Manappuram Finance’s stock price, which surged by over 8% after the company exited the Futures and Options (F&O) ban list. This development has raised several questions regarding the stock’s future potential. Should investors be optimistic, or is this just a temporary rally? In this blog post, we will take an in-depth look at what led to this price movement, explore the company’s recent performance, and provide insights on whether this stock has more room to grow.
What Happened to Manappuram Finance’s Stock Price?
Manappuram Finance, a leading non-banking financial company (NBFC) in India, witnessed a significant surge in its share price by over 8% after the stock was removed from the F&O ban list. The stock opened at ₹182.05 and hit an intraday high of ₹193.60, reflecting bullish sentiment in the market. This marked a sharp reversal from the previous week’s dip, where the stock had fallen from ₹209.35 to ₹168.83.
On technical charts, the stock has shown signs of improvement. It opened with a gap-up and quickly found support at the Middle Bollinger Band and the 100-EMA (Exponential Moving Average), which has historically acted as a crucial support level. Additionally, the stock remained above its 200-day EMA, indicating that the upward trend is likely to continue, at least in the short term. However, momentum indicators, like the Relative Strength Index (RSI), suggest that caution is still warranted, as it currently hovers around 49 with a negative crossover.
What Does It Mean That Manappuram Finance Was on the F&O Ban List?
The F&O (Futures and Options) ban list is a tool used by the National Stock Exchange (NSE) to prevent excessive speculation and risk-taking in stocks. When a stock is added to this list, traders are no longer allowed to create new positions in its derivatives (futures and options) market. This often leads to a decrease in liquidity and can exacerbate price volatility.
In the case of Manappuram Finance, the stock was placed on the F&O ban list on February 14, 2025. The immediate impact was a 5% drop in its share price, and it remained under pressure due to a combination of factors, including weaker-than-expected quarterly results. However, with the lifting of the F&O ban, the stock has managed to regain investor confidence, which is evident from the 8% rally after it exited the ban list.
Manappuram Finance Q3FY25 Results and Impact on Stock Performance
Despite the recent rally, the company has faced significant challenges in the recent past, particularly in its microfinance segment. Manappuram Finance reported a sharp decline in its Q3FY25 results, with its consolidated net profit halving to ₹282 crore. This was primarily due to a loan disbursement ban imposed by the Reserve Bank of India (RBI), which lasted for an entire quarter.
The RBI’s actions stemmed from concerns regarding “usurious” interest rates and excessive mark-ups on funding costs in the microfinance industry. As a result, Manappuram Finance’s microfinance revenue saw a decline of 5%, bringing it down to ₹665 crore. The ban, however, was lifted last month, allowing the company to gradually restart growth in this segment.
While this setback affected the company’s short-term growth prospects, Manappuram Finance is now focusing on shifting its portfolio toward gold loans and secured non-gold loans, which have shown resilience amid challenging market conditions. The company is also increasing its focus on larger ticket-size gold loans, a strategic shift that could help cushion the negative impact of its microfinance business.
1. Technical Analysis and Stock Outlook
According to Sachin Gupta, Senior Research Analyst at 5paisa, Manappuram Finance’s stock has shown a recovery pattern after a sharp decline. The stock has reversed from the support of the Middle Bollinger Band and the 100-EMA, signalling buying interest among traders. The key resistance for the stock is around ₹992-₹1,000, and a break above this level could lead to further upside. On the other hand, the support level is seen at ₹925, and if the stock fails to hold above this level, it may continue to remain in a sideways trend.
2. Analyst Recommendations and Target Price
While the stock has seen short-term volatility due to the challenges in its microfinance business, analysts are optimistic about its long-term growth prospects. Axis Securities has revised its rating for Manappuram Finance from “Hold” to “Buy” based on reasonable valuations and expectations of improved profitable growth over the medium term. The brokerage has set a target price of ₹220, citing the company’s strategic focus on gold loans and secured non-gold loans, which are expected to drive profitability in the coming quarters.
3. Why the Stock Price Surge Is Significant
The surge in Manappuram Finance’s share price is notable for several reasons. First, it marks a recovery after a period of underperformance. The stock had been facing downward pressure due to regulatory hurdles and sector-specific challenges, but with the exit from the F&O ban list and positive market sentiment, it has managed to regain some of its lost ground.
Second, the rally signifies that investors are cautiously optimistic about the company’s ability to weather the challenges it faces. The shift toward gold loans and secured non-gold loans indicates that the company is adjusting its business strategy to align with market realities. With its diversified portfolio and focus on larger ticket-size loans, Manappuram Finance appears to be well-positioned for sustainable growth in the long run.
4. Expect in the Coming Quarters
Looking ahead, Manappuram Finance will likely face continued pressure in the microfinance segment, at least in the short term. However, as the company navigates these challenges, analysts believe that its focus on secured lending products will drive growth and margin stability. The improvement in the quality of the loan book, coupled with the easing of regulatory pressures, could positively impact the stock’s performance in the medium term.
Additionally, with the increase in demand for gold loans and the potential for a more favourable interest rate environment, the company’s gold loan portfolio could become a significant driver of earnings. This could lead to higher profitability and improved investor sentiment, which would further support the stock’s upward momentum.
Should You Buy Manappuram Finance Stock Now?
The question that most investors are likely asking is whether it is a good time to buy Manappuram Finance stock. Given the stock’s recent rally and the company’s strategic shift towards gold loans and secured lending, it appears that the stock has significant potential for long-term growth. However, investors should be aware of the risks associated with the microfinance segment, which may continue to face headwinds in the near term.
If you are considering investing in Manappuram Finance, it is essential to carefully monitor the company’s quarterly results, especially the performance of its microfinance division. Additionally, paying attention to macroeconomic factors such as interest rates and regulatory changes in the financial services sector will provide valuable insights into the stock’s future performance.
For those willing to take a medium-term view, the stock appears to be a promising investment, particularly if it can maintain its focus on large-ticket gold loans and continue improving its asset quality. Given the company’s solid market position and evolving business model, Manappuram Finance could offer attractive upside potential in the future.
Conclusion
Manappuram Finance’s recent rally in stock price, following its exit from the F&O ban list, reflects a positive shift in investor sentiment. Although the company has faced challenges in its microfinance business, its focus on larger gold loans and secured non-gold loans positions it for long-term growth. Analysts are optimistic about the company’s outlook, and with strategic adjustments and a focus on profitability, Manappuram Finance could be poised for sustained growth in the coming quarters.
Investors should closely monitor the stock’s technical indicators, quarterly performance, and broader market trends to assess the right entry point. If the company continues to deliver on its strategy, it could provide attractive returns for those with a long-term investment horizon.
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