Cummins India Ltd. is Rated Hold by MarketsMOJO

Understanding the Current Rating

The 'Hold' rating assigned to Cummins India Ltd. indicates a neutral stance for investors, suggesting that the stock is expected to perform in line with the broader market or sector averages in the near term. This rating reflects a balanced view of the company’s strengths and challenges, based on a comprehensive evaluation of four key parameters: Quality, Valuation, Financial Trend, and Technicals.

Quality Assessment

As of 07 February 2026, Cummins India Ltd. maintains an excellent quality grade. The company demonstrates strong fundamental strength, highlighted by a robust average Return on Equity (ROE) of 22.90%. This figure underscores the firm’s ability to generate healthy profits relative to shareholder equity over the long term. Additionally, the company has exhibited impressive growth in net sales, with an annualised increase of 22.73%, and operating profit growth of 45.30%, signalling operational efficiency and effective management.

Another notable quality indicator is the company’s conservative capital structure, with an average Debt to Equity ratio of zero, reflecting a debt-free position that reduces financial risk and enhances balance sheet stability. This financial prudence is a positive factor for investors seeking companies with sustainable business models.

Valuation Considerations

Despite its strong fundamentals, Cummins India Ltd. is currently rated as very expensive in terms of valuation. The stock trades at a Price to Book (P/B) ratio of 15.3, which is significantly higher than the average valuations of its peers in the Compressors, Pumps & Diesel Engines sector. This premium valuation suggests that the market has high expectations for the company’s future growth prospects.

However, the elevated valuation is tempered by the company’s Price/Earnings to Growth (PEG) ratio of 3.3, indicating that earnings growth may not fully justify the current price premium. Investors should be cautious about the potential for valuation correction if growth expectations are not met.

Financial Trend Analysis

The financial trend for Cummins India Ltd. is currently flat. The company reported flat quarterly earnings in December 2025, with the lowest quarterly Earnings Per Share (EPS) recorded at Rs 17.53. While this indicates some near-term earnings pressure, the company’s longer-term growth trajectory remains intact, supported by consistent sales and profit expansion over recent years.

Over the past year, the stock has delivered a total return of 47.42%, outperforming the BSE500 index in each of the last three annual periods. Profit growth over the same period was 16%, reflecting steady operational performance despite short-term fluctuations.

Technical Outlook

From a technical perspective, Cummins India Ltd. holds a mildly bullish grade. The stock has shown resilience with positive momentum over the medium term, including a 6.17% gain over the past week and a 19.98% increase over the last six months. However, the one-day change as of 07 February 2026 was a slight decline of 0.62%, indicating some short-term volatility.

Institutional investors hold a significant stake of 40.14%, which often provides stability and confidence in the stock’s prospects, given their capacity for detailed fundamental analysis and long-term investment horizons.

Here’s How the Stock Looks Today

As of 07 February 2026, Cummins India Ltd. remains a midcap company within the Compressors, Pumps & Diesel Engines sector, with a MarketsMOJO Mojo Score of 65.0, corresponding to the 'Hold' grade. This score reflects a balanced view of the company’s current strengths and valuation concerns.

Investors should note that while the company’s quality metrics remain excellent, the very expensive valuation and flat recent financial trends suggest limited upside potential in the near term. The mildly bullish technical indicators provide some support, but caution is warranted given the premium price levels.

For investors, the 'Hold' rating implies that accumulating additional shares at current levels may not be advisable, but existing shareholders might consider maintaining their positions while monitoring future developments closely. The stock’s consistent long-term returns and strong fundamentals provide a solid foundation, but valuation discipline is key to managing risk.

Investment Implications

Investors considering Cummins India Ltd. should weigh the company’s excellent quality and consistent long-term growth against its current valuation premium and flat recent earnings trend. The 'Hold' rating reflects this nuanced view, signalling that while the stock is not unattractive, it may not offer significant immediate gains relative to its price.

Given the company’s strong institutional backing and solid fundamentals, it remains a credible holding for investors with a medium to long-term horizon. However, those seeking aggressive growth or value opportunities might find better prospects elsewhere until valuation levels become more attractive.

Monitoring quarterly earnings updates and sector developments will be crucial for reassessing the stock’s outlook. Any improvement in financial trends or valuation adjustments could prompt a re-evaluation of the rating in the future.

Summary

To summarise, Cummins India Ltd. is rated 'Hold' by MarketsMOJO as of 05 February 2026, with the current analysis reflecting data up to 07 February 2026. The company’s excellent quality and strong long-term fundamentals are balanced by very expensive valuation and flat recent financial trends. Mildly bullish technicals and significant institutional ownership provide some support, but investors should approach the stock with measured expectations given the premium price levels.

This rating serves as a guide for investors to maintain existing positions while exercising caution on new investments until clearer signs of valuation normalisation or financial improvement emerge.

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