Stock Of The Day: This Tata Stock Reels Under Bearish Pressure As Outlook Sours | Key Technicals
The Mumbai-based company is cautious on near-term demand after earnings fell in July-September 2024.
Dalal Street bears continue to bets on Tata Motors Ltd. after a run-up in the earlier half this year, as weak demand and other headwinds haunt the stock in the latter half.
The counter of the third largest Tata Group company fell for the fifth consecutive day on Friday to end the week by nearly a 5% decline after the auto-maker announced price hikes of its commercial vehicles from the new year. The benchmark NSE Nifty 50 is down by 1.7% on a weekly basis.
Tata Motor's stock fell as much as 1.44% during the day to Rs 775 apiece on the NSE.
Even after global funds began buying back into domestic equities, the stock was under pressure on account of weak sales and demand caution from the automaker going into 2025.
The stock broke the immediate support of Rs 780.9 and currently tests the next support of Rs 777 level. A candlestick closing beyond this level could send the stock sliding to Rs 773 to Rs 772 levels.
The counter still trades below the 14-day simple moving average and the 21-day exponential moving average which it broke on Wednesday. Tata Motors also trades below its 200-day moving average, confirming its bearish outlook. If the stock manages to close above Thursday's close of Rs 784, there could be possible signs of recovery in the short term.
It has risen 7.8% during the last 12 months and has declined by 0.15% on a year-to-date basis. The relative strength index was at 37.
Twenty out of the 35 analysts tracking the company have a 'buy' rating on the stock, 10 suggest a 'hold' and five have a 'sell', according to Bloomberg data. The average of 12-month analyst price targets implies a potential upside of 23%.
Price Hikes
Tata Motors on Thursday said it will increase prices of its trucks and buses portfolio by up to 2% effective Jan. 1, 2025, citing rising input costs. "The price increase is to offset the rise in input costs."
A day earlier, the automaker said it would hike the price of its passenger vehicle portfolio, including electric vehicles, by up to 3% from January next year. "The price hike is being undertaken to partially offset the rise in input costs and inflation."
Passenger vehicle makers, including Maruti Suzuki India Ltd. and Hyundai Motor India Ltd., along with luxury carmaker Mercedes-Benz, BMW and Audi have also announced price hikes from January.
Caution Ahead
The Mumbai-based automaker is cautious on near-term demand after earnings fell during July-September 2024 due to a decline in sales of cars and trucks alike.
“Growth in the second quarter was impacted due to significant external challenges…,” PB Balaji, group chief financial officer at Tata Motors, said in a statement. “As the supply challenges ease and demand picks up, we are confident of steady improvement in our performance and delivering a strong H2 FY25.”
Tata Motors Q2 FY25 (Consolidated, YoY)
Revenue down 3.5% at Rs 1.01 lakh crore (Estimate: Rs 1,03,005 crore)
Ebitda down 14.2% at Rs 11,736 crore (Estimate: Rs 14,636 crore)
Margin down 140 basis points at 11.6% (Estimate: 14.20%)
Net profit down 10% at Rs 3,450 crore (Estimate: Rs 4,805 crore)
Net automotive debt at Rs 22,000 crore
Tata Motors reported a marginal increase in overall sales. However, the total commercial vehicles sales last month were down 1% at 27,636 units as against 28,029 units in the same period last year.
Further, analysts are signaling a cautious road ahead for Tata Motors as challenges weigh on its luxury arm Jaguar Land Rover and domestic passenger vehicle business, highlighting margin pressure, competitive headwinds, and modest growth expectations.
