Tata Motors has soared 12% today. What’s the reason?

2021-06-03T074932Z_1894390348_RC2VSN95OBPK_RTRMADP_3_INDIA-TATA-MOTORS-BONDS_1625744834671_1627727641456-e1c209cd

Today i.e., October 7th, the Nifty auto index has posted gains of 4.4%. Four of the top 5 gainers on the Nifty 50 are auto makers. Especially the Indian multinational automotive manufacturing company Tata Motors rallied over 12%. It has become country’s second largest auto manufacturing company in terms of market capitalization. Today its market cap crossed Rs.1.25 lakhs.

Then what made the stock to rally? The global financial services firm, Morgan Stanley has increased its target price for the stock to Rs.448 from Rs.298 a share. The Tata Motors DVR’s target price has raised by Rs.300 from Rs.119 a share. Both the Tata Motors and the Tata Motors DVR shares were upgraded to overweight from equal weight.

In its report the agency has said that in their belief the Indian business of Tata Motors will show incremental upside growth. They expect that 2022-23 would be good for Indian auto makers, especially for Tata Motors. It also said that Tata motors is going to see robust operating and financial leverage gains. It expects that in best case scenario the company will achieve zero net debt target by 2024. It also expects that the Indian business to turnaround from losses to profits by financial year 2023.

This report made the stock to soar up to 14%. But it shed some of the gains and settled at 12% gains from previous day’s closing point. The stock closed at Rs.376.50 on Nifty 50. This was its new 52-week high price. It was the top gainer of today.

These gains may sustain or not. But the company is turning around its fortunes. It has set an ambitious goal regarding EV segment. However, like its national and global peers, Tata Motors has also been facing the semiconductor chip shortage due to the global supply chain disruption. This has been the major concern for the auto makers for a couple of quarters. Reports say that it will continue for some time. On the other hand, the auto makers have already started searching for alternative sources like shifting to silicon carbide instead of silica. But these steps take some time to give a solution.

Raghuveer Jandhyala

Editor, Tax Concept. I have written on market, finance, management, and technology.

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