HPCL, BPCL, IOC downgraded by Investec; Brokerage says market overlooking a key risk

India's state-run Oil Marketing Companies (OMCs), Hindustan Petroleum Corporation Ltd. (HPCL), Bharat Petroleum Corporation Ltd. (BPCL) and Indian Oil Corporation Ltd. (IOC) were downgraded by brokerage firm Investec in its latest note on Tuesday, November 25, as it believes that the market appears to be overlooking a key risk for these companies.

Although Investec has downgraded HPCL, BPCL, and IOC to "sell" from "hold" earlier, it has left the price targets on these stocks unchanged at ₹425, ₹330 and ₹145 respectively. The price targets imply potential downside of 8% each for HPCL and BPCL and 12% for Indian Oil.

The brokerage wrote in its note that investor interest has seen a sharp surge in OMCs along with the simultaneous rise in refining margins. Singapore Gross Refining Margins (GRMs) have doubled in less than two months to $13 per barrel, according to the brokerage.

However, Investec wrote in its note that this only reflects a part of the picture.

The profitability of these OMCs is far more sensitive to marketing margins, which, according to Investec, have weakened materially.

Despite crude oil prices remaining soft, the same diesel cracks that are aiding refining margins, have now pushed the diesel marketing margins in to negative territory from around ₹4 per litre earlier.

"If diesel cracks remain elevated, they could significantly erode earnings," the Investec note said.

Since October 2025, shares of these oil marketing companies have risen between 20% to 25%, but the market, according to Investec, appears to be overlooking this risk of diesel cracks.

Here's a look at what analysts have to say on these OMCs:

Stock	Buy	Hold	Sell
HPCL	24	3	7
BPCL	24	4	5
IOC	22	6	6

Shares of HPCL, BPCL and IOC are up 12.5%, 22.5%, and 21% respectively so far in 2025. All three stocks had ended at the day's low on Monday.