As the given sentence in the direct speech is in the present continuous tense, we need to convert it into past continuous tense in the indirect speech.
Option A - 'Has worked' is used to represent the sentence in the present perfect tense. Thus option A is incorrect.
Option B - 'Has been working' is used to represent the sentence in the present perfect continuous tense. Thus option B is incorrect.
Option D - 'Is working' is used to form the sentence in the present continuous tense and we can't use the same tense in the indirect tense unless it is a universal truth. Thus option D is incorrect.
Option C - 'Was working' can be used here as 'was' is used to represent the past tense and 'working' is used to represent the continuous tense. Thus option C is the correct answer.
'The teacher said that Madhu was working sincerely.'