Investec says ‘sell’ on HPCL, BPCL and IOC; prefers Reliance Industries on refining upcycle

Brokerage firm Investec has reiterated its ‘Sell’ stance on Oil Marketing Companies (OMCs), saying current valuations do not reflect a realistic through-cycle earnings outlook.The brokerage continues to prefer Reliance Industries, maintaining a ‘Buy’ rating on the stock as its preferred play on the refining upcycle.

Investec has ‘Sell’ ratings on Bharat Petroleum Corporation, Hindustan Petroleum Corporation and Indian Oil Corporation, with price targets of ₹330, ₹425 and ₹145, respectively.

The brokerage said that OMCs delivered another strong performance in the third quarter, supported by healthy core operations and subsidy support. However, equity markets remain unconvinced.
Since Investec’s downgrade in November 2025, the stocks have largely remained range-bound, moving between -7% and +5%, despite robust near-term earnings momentum.This, the brokerage said, reinforces its view that valuations are acting as the binding constraint.

Even under bull-case assumptions, OMCs are trading at a 10-30% premium to their five-year historical average multiples, leaving the risk-reward skewed to the downside, according to Investec.

The brokerage also flagged macro risks. With Brent crude back above $70 per barrel amid rising geopolitical tensions and refining margins elevated at around $9 per barrel, the risk of renewed marketing margin compression is increasing.

This could pose downside risks to earnings and valuations for OMC stocks going forward.

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