Indian Oil shares in focus as Nomura sees 42% upside after strong Q2 earnings beat

Indian Oil Corporation (IOC) shares are in sharp focus after Nomura initiated a buy call with a 42% upside target of ₹185, driven by a strong Q2 FY27 earnings beat on the back of higher gross refining margins and inventory gains.

• Nomura maintained Buy on IOC with target price of ₹185 — implying 42% upside from current levels
• Strong gross refining margins (GRMs) and inventory gains drove the Q2 earnings beat ahead of consensus estimates
• Management had flagged Q2 as a strong quarter; results were in line with that guidance, reinforcing execution credibility

IOC's Q2 outperformance is broadly in line with the refining sector's recent tailwind from lower crude input costs and improved product spreads. Nomura's 42% upside call positions IOC as one of the more attractively valued PSU refiners at current market prices. With crude oil prices moderating globally — partly driven by US-Iran diplomatic developments — the refining margin environment remains supportive for near-term earnings.

The inventory gain component of Q2 earnings warrants attention: such gains are inherently cyclical and dependent on oil price direction. If crude prices reverse course, inventory losses could compress future quarters' profits. However, the structural GRM improvement signals operational efficiencies that are more durable. Investors will be watching Q3 GRM data and crude procurement costs as the primary earnings levers.

For the broader Indian PSU energy sector, IOC's beat reinforces a positive earnings revision cycle that has already lifted BPCL and HPCL sentiment. The Diwali pre-season typically sees elevated LPG and fuel demand, which could provide an additional near-term volume tailwind. Any RBI rate action or currency movement affecting import costs remains a key macro risk to monitor.

Synthesized from 1 source — full coverage, sentiment breakdown, and forward signals below.