Tata Motors shares approach pre-tariff level, down 45% from 52week high; what should investors do?

Shares of Tata Motors have plunged 45% from their record high led by Trump Tariffs and weak JLR outlook. The auto sector stock hit a 52 week high of Rs 1179.05 on July 30, 2024. The stock fell to a fresh 52-week low of Rs 542.55 on April 7 after US President Donald Trump's tariffs came into effect from April 2 this year. 

However, the Tata Group stock has risen 20.29% since then. It is still trading below the Rs 671.20 mark, it stood at before Trump announced imposition of additional tariffs 26% on Indian imports. 

It closed at Rs 671.90 on April 2, hours ahead of the 'Liberation Day' announcement. Tata Motors' UK arm JLR has nearly 20% share in the US market, second only to the European Union, data from industry body SMMT show.

In the current session, Tata Motors shares were trading 1.44% higher at Rs 653.40 on BSE. Market cap of the Tata Group firm stood at Rs 2.40 lakh crore. The stock has a one-year beta of 1.3, indicating very high volatility during the period

Tata Motors stock is neither oversold nor overbought on charts, indicates its Relative Strength Index (RSI) of 48.6. A RSI value above 70 indicates a stock is overbought and below 30 denotes that it is oversold on charts. 

The stock has seen very high volatility with its beta climbing to 1.3 in a year. 

Pritesh Mehta, Executive Vice President of Technical Analysis at YES Securities has an avoid call on the Tata Motors stock. 

"Though Tata Motors is holding onto the point of polarity zone. Break above the same in March 2023, resulted in a change in orbit on the upside. Correction phase of the second half of 2024 brought the stock back to its previous peak. Despite underperformance against the Nifty Auto index, it held onto the support zone and staged a reversal. Yet it is lacking strength to provide a follow through move. Pattern of High pole and sustenance below 10-column average on P&F chart displays weakness in the revival move," said Mehta. 

Tata Motors stock is completely ignoring JLR valuations, said domestic brokerage Emkay Global. It has a price target of Rs 800 on the Tata Group stock. 

However, the brokerage sees some weakness in the stock and trimmed its EPS forecast until FY27. 

"Even with bear case assumptions of a 25 per cent drop in US sales next year, the bigger Tata Motors financial health improvement story remains largely intact – net auto debt-to-equity at 0.24x in FY27 (bear case) vs 0.1x in FY25E; 1.1 times in FY22. We trim FY25/FY26/FY27 EPS by 5-6 per cent to factor in some of the potential weakness. We retain Buy while cutting our target price (SoTP-based) by 16 per cent to Rs 800," said Emkay Global. 

Meanwhile, Kotak Equities has trimmed its price target by 20% as it expects the company's UK arm to face dual headwinds in the US on the back of the latest Trump tariffs. It has reduced its target price to Rs 600 per share from the previous Rs 750 apiece.  The brokerage downgraded its rating on Tata Motors to "reduce" from "add".