Market rally boosts stocks of loss-making companies on turnaround hopes

The rally comes amid a recovery phase in markets, with SMIDs climbing back toward their September 2024 highs

A market rally in the past few weeks lifted not just quality stocks, but also loss-making companies that surged as much as 64 per cent. But analysts are cautious and suggest investors pick companies with earnings visibility and reasonable valuations. 

In the NSE 500 universe, 29 companies — including Ola Electric and Swiggy — reported losses for the quarter ended March 2025 (Q4FY25). However, 26 of those companies have given positive returns since April 1. 

Furthermore, 17 of these stocks outperformed the benchmark Nifty 50, according to data. 

Valor Estate’s stock led the pack with a gain of nearly 64 per cent since April 1, despite the real estate company reporting a loss of ₹2.4 crore in Q4FY25.  

It was followed by RattanIndia Enterprises, Motilal Oswal Financial Services, and Alok Industries, all of which posted gains of over 45 per cent. The benchmark Nifty 50 and Sen­sex have risen nearly 8 per cent since April 1. IndusInd Bank (up 31 per cent), Network18 Media & Investments (up 28 per cent), ITI (up 28 per cent), Raymond Lifestyle (up 25 per cent), GMR Airports (up 20 per cent), and NMDC Steel (up 19 per cent) were other stocks that gained despite losses in the fourth quarter. Ola Electric Mobility fell 23 per cent after its loss widened to ₹870 crore. Tejas Networks and Aditya Birla Fashion and Retail complete the list of stocks that fell after reporting losses.   

Long-term story 

Markets are forward-looking and rarely react to past earnings alone, said Bhavik Joshi, business head at INVasset PMS. “The rally appears to be driven by a mix of narrative-based optimism, technical momentum, and a pickup in liquidity.” 

It comes amid a market recovery, with small and midcaps gradually climbing back toward their September 2024 highs. 

The rally reflects reversion and relative value being rediscovered, rather than euphoria, analysts said. 

Loss-making companies aren’t necessarily untouchable, said G Chokkalingam, founder of Equinomics Research, listing three reasons why investors might still buy their stocks. 

Turnaround potential is one reason stocks might see buying pressure. “Some companies, especially in sectors such as ecommerce, are currently loss-making, but investors believe in their long-term growth story.” 

The other reasons might be the underlying asset value and pure speculation, he said.   

Retail investors 

Retail investors are likely fuelling a large part of the rally, Joshi said. 

“Many of these stocks have shown price surges with unusually high trading volumes, suggesting frenzied activity typical of retail-driven moves.” 

Jhunjhunwala family-backed Valor Estate had a retail ownership of 25 per cent as of the March quarter. The next two top gainers, RattanIndia Enterprises and Motilal Oswal Financial Services, had retail holdings of 15 per cent and 11 per cent, respectively. 

However, Chokkalingam said that both retail and institutional investors could be participating in these stocks. “Some are being chased by retail investors without a full understanding of the fundamentals, while others are being bought on hopes of a turnaround.”