This stock with high RoE witnessed a cup pattern breakout; watch out!

Buyer demand at A is evident from recent demand for the stock. Interestingly, the stock is also meeting Warren Buffett’s rules of investing.   

Monarch Networth Capital Ltd (MNCL) is a strategic amalgamation of two leading financial service providers i.e. Monarch Group of Companies and Networth Stock Broking Limited. With more than two decades of devising as well as executing smart financial products & strategies, the company has emerged as one of the leading and reliable financial services providers.   

The stock jumped over 10 per cent on Tuesday and made a fresh high on the bourses. The upmove in the stock was witnessed on the back of solid volumes as the volume for the day is the highest single-day volume in the last three trading sessions.   

Technically, the stock has seen a breakout of a 15-week long cup pattern while the depth of this cup pattern is about 40 per cent. Since the stock is trading at a fresh all-time high, it is above all the short as well as long-term moving averages. The RSI is in a strong bullish zone. The +DMI moved above the prior swing high and interestingly, it's in a rising trajectory. The ADX is also rising and both +DMI and ADX are above the 40-mark, which indicates that the trend is strong.   

Also, the stock has an RS rating of 92, which is great as it indicates outperformance as compared to other stocks. Buyer demand at A is evident from recent demand for the stock. Interestingly, the stock is also meeting Warren Buffett’s rules of investing.   

Recently, Vaibhav Shah, MD of Monarch Networth Capital said that Monarch Alternative Investment Fund (AIF) has successfully raised Rs 252 crore in its second closed-ended Cat-III Equity AIF Fund. This money was raised from a set of UHNIs, corporates, and family offices. The entire fund raise was through the group's relationships, without appointing any intermediaries.  

He further added, “With this launch, we are moving a step closer to our aspiration of foraying into the mutual fund business; the application will be made to SEBI in this financial year. We aspire to generate superior risk-adjusted returns for our clients by investing in solid listed franchises, which have a proven track record of consistency in cash flow, improving return ratios, healthy balance sheets, a clear moat in the business, and impeccable management pedigree. The first fund, launched in October 2020, has been running on the same principles and established a satisfactory track record.  

Monarch Networth plans to infuse Rs 1,000 crore in the next three years. This money is proposed to be utilised in newer businesses such as debt syndication, setting up of a bond trading desk, enhancing SEBI-approved fund-based activities, strengthening the existing business, and complete digitalisation of retail broking.  

Meanwhile, the group posted a consolidated profit after tax of Rs 57.8 crore in FY22. FY22 EPS stood at Rs 18.6 while the company reported an industry-leading RoE of 41.9 per cent. Its net worth position remains healthy at Rs 167 crore. Besides, the company has witnessed a three-year CAGR of 65.3 per cent in its profitability.