Why is Ingersoll-Rand (India) Ltd falling/rising?

Recent Price Movement and Market Context

The stock’s 1.09% gain on 02-Jan reflects a short-term positive momentum, with a weekly return of 4.41% significantly outperforming the Sensex’s 0.85% gain over the same period. However, this recent uptick contrasts with the stock’s one-month decline of 5.21%, while the broader market has advanced by 0.73%. Year-to-date, the stock has marginally increased by 0.32%, slightly trailing the Sensex’s 0.64% rise.

Despite today’s positive movement, the stock has underperformed over the last year, delivering a negative return of 16.88% compared to the Sensex’s 7.28% gain. This underperformance is notable given the company’s strong long-term growth, with a three-year return of 81.40% and an impressive five-year return of 441.35%, both well above the market benchmarks.

Technical Indicators and Trading Activity

From a technical perspective, the stock is trading above its 5-day and 20-day moving averages, signalling short-term strength. However, it remains below its 50-day, 100-day, and 200-day moving averages, indicating that longer-term momentum has yet to fully recover. Investor participation appears to be waning, as delivery volume on 01 Jan dropped sharply by 58.73% compared to the five-day average, suggesting cautious trading behaviour despite the stock’s liquidity being sufficient for moderate trade sizes.

Fundamental Strengths Supporting the Stock

Ingersoll-Rand (India) Ltd boasts robust long-term fundamentals that underpin investor confidence. The company maintains an average Return on Equity (ROE) of 31.26%, reflecting efficient capital utilisation. Operating profit has expanded at an annual rate of 37.16%, signalling healthy growth in core business operations. Additionally, the company’s average debt-to-equity ratio stands at zero, indicating a conservative capital structure with minimal reliance on debt financing. Promoters hold the majority stake, which often aligns management interests with shareholder value creation.

Valuation and Profitability Concerns Temper Optimism

Despite these strengths, valuation metrics and recent financial results have raised caution among investors. The company’s ROE of 40.7% is accompanied by a high Price to Book (P/B) ratio of 17.1, suggesting the stock is expensive relative to its book value. Although it trades at a discount compared to its peers’ historical valuations, the elevated P/B ratio may limit upside potential. Furthermore, the Price/Earnings to Growth (PEG) ratio stands at 4.3, indicating that the stock’s price growth is not fully justified by its earnings growth rate.

Profit growth over the past year has been modest at 9.7%, which contrasts with the stock’s negative total return of 16.88%. This divergence points to market scepticism about the sustainability of earnings growth or concerns about other operational factors. The company’s debtors turnover ratio, a measure of how efficiently it collects receivables, was notably low at 4.43 times in the half-year period ending September 2025, signalling potential inefficiencies in working capital management.

Market Underperformance and Investor Sentiment

Ingersoll-Rand’s underperformance relative to the broader market and its sector peers over the last year has weighed on investor sentiment. While the BSE500 index generated a 5.35% return during this period, the stock’s negative return of 16.88% highlights its laggard status. Flat financial results reported in September 2025 further contributed to subdued enthusiasm, as investors seek clearer signs of growth acceleration or operational improvements.

Conclusion: A Stock Balancing Growth Potential with Valuation Risks

Ingersoll-Rand (India) Ltd’s recent share price rise on 02-Jan reflects short-term optimism supported by strong long-term fundamentals and healthy operating profit growth. However, the stock’s expensive valuation, flat recent results, and underperformance relative to the market over the past year temper this enthusiasm. Investors appear cautious, as evidenced by declining delivery volumes and the stock’s position below key longer-term moving averages.

For investors, the stock presents a nuanced opportunity: its impressive five-year returns and solid capital efficiency are attractive, yet the high Price to Book ratio and modest profit growth suggest limited near-term upside without a clearer catalyst. Monitoring upcoming quarterly results and improvements in working capital metrics will be crucial to reassessing the stock’s trajectory in the context of broader market conditions.

Limited Time Only! Subscribe for Rs. 12,999 and get 1 Year of MojoOne + an Additional Year Completely FREE. Don't miss out on this exclusive offer. Claim Your Free Year →