Indian Oil Corporation Ltd Upgraded to Buy on Strong Financial and Technical Signals

Quality Assessment: Robust Financial Performance and Operational Strength

Indian Oil Corporation Ltd’s quality rating has improved significantly, driven by its strong financial performance in the recent quarter (Q2 FY25-26). The company reported a remarkable 105.8% growth in Profit After Tax (PAT) at ₹7,817.55 crores compared to the previous four-quarter average, signalling enhanced profitability. Operating profit surged by 28.19%, reaching ₹16,245 crores, while net sales have grown at an annualised rate of 14.63%, reflecting sustained top-line momentum.

Further bolstering its quality credentials, IOC’s operating profit to interest ratio has reached a peak of 7.16 times, indicating a comfortable buffer to service debt obligations. The company’s Return on Capital Employed (ROCE) stands at a healthy 10.6%, underscoring efficient capital utilisation and operational effectiveness. These metrics collectively highlight IOC’s strong fundamentals and operational resilience in a volatile oil market.

Valuation: Attractive Pricing Relative to Peers and Historical Levels

Valuation metrics have played a pivotal role in the upgrade decision. IOC currently trades at ₹162.80, which is below its 52-week high of ₹174.45 but comfortably above the 52-week low of ₹110.75, suggesting a balanced valuation range. The company’s enterprise value to capital employed ratio is a modest 1.1, indicating that the stock is trading at a discount relative to its peers’ historical valuations.

Moreover, the stock’s Price/Earnings to Growth (PEG) ratio is an exceptionally low 0.2, signalling undervaluation given the company’s strong earnings growth trajectory. The dividend yield of 4.9% further enhances the stock’s appeal, offering investors a steady income stream alongside capital appreciation potential. This combination of attractive valuation and solid dividend payout supports the Buy rating.

Financial Trend: Sustained Growth and Market-Beating Returns

Indian Oil Corporation Ltd’s financial trend remains robust, with the company delivering market-beating returns over multiple time horizons. Over the past year, IOC’s stock has appreciated by 32.74%, significantly outperforming the Sensex’s 8.49% return. The company’s three-year and five-year returns stand at 101.11% and 166.23% respectively, dwarfing the Sensex’s corresponding returns of 38.79% and 75.67%. Even on a ten-year basis, IOC has delivered a commendable 146.82% return, underscoring its long-term growth potential.

Profit growth has been equally impressive, with a 48.6% increase in profits over the last year, reinforcing the company’s earnings momentum. The high institutional holding of 38.17% further reflects confidence from sophisticated investors who have the resources to analyse IOC’s fundamentals thoroughly. This strong financial trend supports the upgraded Buy rating and signals continued investor interest.

Technical Outlook: Shift to Mildly Bullish Momentum

The technical landscape for IOC has improved notably, contributing to the upgrade. The technical trend has shifted from sideways to mildly bullish, supported by several key indicators. On a weekly basis, the Moving Average Convergence Divergence (MACD) remains mildly bearish, but the monthly MACD is bullish, indicating longer-term positive momentum. The Relative Strength Index (RSI) shows no significant signal on both weekly and monthly charts, suggesting room for further upward movement without being overbought.

Bollinger Bands indicate bullishness on the weekly chart and mild bullishness monthly, while daily moving averages also reflect a mildly bullish stance. The Know Sure Thing (KST) indicator is mildly bearish on both weekly and monthly timeframes, but this is offset by the Dow Theory signals, which are mildly bullish weekly. On-balance volume (OBV) is mildly bullish weekly, signalling accumulation by investors. Overall, these mixed but predominantly positive technical signals justify the upgrade to Buy, as the stock appears poised for further gains.

Price and Market Capitalisation Context

IOC’s current market price of ₹162.80 represents a 2.42% increase on the day, with intraday highs reaching ₹164.00. The stock remains well positioned within its 52-week trading range, maintaining strength above the ₹158.95 previous close. The company holds a Market Cap Grade of 1, reflecting its status as a large-cap heavyweight within the oil sector. This solid market capitalisation underpins liquidity and investor confidence.

Comparative Performance Against Sensex

When benchmarked against the Sensex, IOC has consistently outperformed across short and long-term periods. The stock’s one-week return of 2.45% surpasses the Sensex’s 0.53%, while the one-month return of 1.72% contrasts with the Sensex’s negative 3.17%. Year-to-date, IOC’s decline of 2.19% is marginally better than the Sensex’s 3.37% fall. These comparative returns highlight IOC’s relative resilience amid broader market volatility.

Outlook and Investment Implications

The upgrade of Indian Oil Corporation Ltd to a Buy rating by MarketsMOJO reflects a comprehensive reassessment of the company’s fundamentals and market positioning. The combination of strong financial results, attractive valuation metrics, positive technical indicators, and consistent market outperformance provides a compelling case for investors to consider increasing exposure to IOC.

While the oil sector remains subject to global commodity price fluctuations and geopolitical risks, IOC’s operational efficiency, robust balance sheet, and dividend yield of 4.9% offer a degree of defensive strength. Institutional investor confidence further validates the company’s prospects. Investors should monitor quarterly earnings and technical signals closely, but the current upgrade signals a favourable risk-reward profile for this large-cap oil major.

Summary of Ratings and Scores

As of 28 January 2026, Indian Oil Corporation Ltd holds a Mojo Score of 74.0 and a Mojo Grade of Buy, upgraded from Hold. The Market Cap Grade remains at 1, reflecting its large-cap stature. Technical grades have shifted from sideways to mildly bullish, supported by mixed but predominantly positive weekly and monthly indicators. Financial metrics such as ROCE, operating profit growth, and PAT growth have all improved, underpinning the upgrade decision.

In conclusion, Indian Oil Corporation Ltd’s upgrade to Buy is well justified by its strong quality fundamentals, attractive valuation, positive financial trends, and improving technical outlook. This positions the stock as a compelling investment opportunity within the oil sector for both long-term and tactical investors.

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