Tata Motors share has gained 32% in last three months: Time to buy, sell or hold the stock?

Tata Motors share was reeling under losses as auto sector was clouded by economic slowdown for more than a year. Uncertainties on the global front also hit sales of its UK arm JLR which affected the stock

Tata Motors share price rose 3% intra day in trade today after its British arm Jaguar Land Rover (JLR) reported a consistent improvement in China sales for the fifth consecutive month in November. Share price of Tata Motors gained 3.03% to Rs 166.40 compared to the previous close of Rs 161.50 on BSE. Tata Motors share has lost 5.19% in last three days.

The large cap stock has fallen 1.32% in last one year and fallen 7.13% since the beginning of this year. Jaguar Land Rover retail sales in November  stood at were 46,542 vehicles, down 3.4% compared to November 2018. UK sales fell 10.8% reflecting lower industry and lower incentives on selected models.

In Europe, JLR sales fell 16.8%, largely reflecting higher sales a year ago ahead of tax changes in certain jurisdictions. However, sales continued to improve in China rising 29% year-on-year marking the fifth consecutive month of double-digit sales growth in the region. North America also logged 4.9% rise in sales, achieving best ever November sales levels.

Also read: Maruti Suzuki stock gains over 3% as production rises in November

After the stock hit intra day high of Rs 166.40, investors booked profit which made the stock lose all gains. Finally, the stock closed 0.59% lower at Rs 160.55 on BSE. 

However, Tata Motors stock has gained 32% in last three months. On October 9, the stock closed at Rs 120.85 on BSE.  

The stock was reeling under losses as auto sector was clouded by economic slowdown for more than a year. Uncertainties on the global front also hit sales of its UK arm JLR which affected the stock.

Also read: Why Tata Motors shares jumped 7% in intraday trade

Of late, with auto companies reporting sales which negate the effect of slowdown, Business Today spoke to analysts to find out how to play the stock in the future.

Mustafa Nadeem, CEO at Epic Research said, "The stock is in a downtrend without any question on all timeframes. There is a short-term pullback but that now is facing a stiff resistance that is placed at its 50 day exponential moving average on a weekly scale. There is volatility which we are observing on the daily scale with a huge gap but then a follow-through is not seen as confirmed by rejection and prices coming down to levels of 160.

We believe these are symptoms of a character change on a daily scale but we need more evidence on higher yields since the trend is down. Any investor looking to create a short to a medium-term position in Tata Motors should utilise the levels of 140-150 for a test of 180. Taking out 180 on a closing basis will give a thrust to prices to further scale up to 230. Closing below 140 should violate this trading set up."

Also read: Maruti Suzuki to increase prices of most cars from January 2020

Rahul Agarwal, Director Wealth Discovery/EZ Wealth said, "Tata Motor's India business appears to have bottomed out in Q2FY20, although a full-blown recovery may be a few quarters away. Although, in the domestic markets, BSVI is a major concern along with pressure from rise in commodity prices that may hit input cost and offset any price hike. The company reported Rs 583 crore profit before tax in Q2, which surprised the markets as the consensus indicated a net loss. Going forward, we expect that capex will continue to remain high as the company has to invest in new technologies and products especially with its foray into electric vehicles.

Although, the management's effort to bring JLR back on track is re-assuring, we need a couple of more quarters of robust sales to see a clear path to sustainable growth. In immediate and near term in the absence of any significant catalysts that can propel the stock, we expect the stock to trade sideways along with the broad market trends. Investors are therefore advised to wait for some meaningful pullback before buying. For existing investors, it is recommended to hold the stock in the long term."

By Aseem Thapliyal