China Cuts Interest Rates, Tata Motors Gains

Tata Motors shares, under huge selling pressure because of the slowdown in China, gained for the second straight session on Wednesday. Tata Motors shares jumped as much as 3.76 per cent on hopes that the interest rate cut announced in China will boost sales of its Jaguar Land Rover range of luxury cars.

China on Tuesday cut its benchmark lending rate by 25 basis points to 4.6  per cent, a move aimed to lift its $10 trillion economy. Lower credit cost will boost consumer sentiment in the world's second biggest economy, analysts said.

"The stock has moved higher after reports of interest rate cut in China came out. Fundamentally, this news means that the EMIs would come down that may boost sales of the company," said market analyst Salil Sharma of kapursharma.com. 

Jaguar Land Rover sales have come under pressure over the last two quarters because of the slowdown in China, the world's biggest market for cars. The slowdown in Jaguar Land Rover sales has worried analysts. JLR sales contribute nearly 80 per cent of Tata Motors' revenues.

But Wednesday's gain is not a sign of a long-term recovery. Analysts said the positive news coming out of China may have led to short squeeze, pushing Tata Motors shares higher.

"This bounce is a good opportunity to get out of this stock. Selling pressure is likely to emerge around Rs 348-350," Mr Sharma added.

After recent fall, Tata Motors has become the cheapest auto stock in India trading at 12 month forward price earning of 6.5 times versus 24.1 times of rivals, according to Reuters data.

Shares of Tata Motors ended 2.3 per cent higher at Rs 336.80.

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