Tata Motors shares are now down 29% from record highs; should you bottom fish?

Shares of Tata Motors resumed declines after a one-day halt on Monday. The stock fell 4.06 percent to close at Rs 843.05. At this price, it is down 28.50% from its all-time high of Rs 1,179.05, a level observed on July 30, 2024. On a year-to-date (YTD) basis, the scrip is up 6.65% from an 11.20% rise in the benchmark BSE Sensex.

On the sales front, the automaker reported a 12% decline in the September 2024 quarter (Q2 FY25) at 2,15,034 units from 2,43,024 units in the year-ago period. Tata Motors is scheduled to report its second quarter earnings on November 8.

Kranthi Bathini, director of equity strategy at WealthMills Securities, said stocks are facing selling pressure due to weak car sales. “Investors with a longer-term horizon may hold on to Tata Motors as China’s stimulus package could have a positive impact on JLR (Jaguar Land Rover) sales,” the market expert noted. The automaker derives about 67% of its revenue from JLR, while JLR gets nearly 27% of its volumes from China.

Technically, support on the counter could be seen around the Rs 800 levels. That said, one analyst recommended against bottom fishing at current levels.

Osho Krishan, Senior Research Analyst – Technical & Derivatives at Angel One said, “Tata Motors has seen a significant decline from the peak. The short-term market structure indicates considerable volatility with crucial support seen around the Rs 800 sub-levels. Meanwhile, the 920-940 Range is a formidable obstacle for stocks. Getting a decisive break above this level could reignite positive momentum and investor confidence in the company.”

Jigar S Patel, Senior Manager – Technical Research Analyst at Anand Rathi said, “Support will be at Rs 800 and resistance at Rs 887. A decisive move above the Rs 887 level may trigger another rally towards Rs 920. The range of the expected trading range will be between Rs 800 and 920 in the short term.”

Kushal Gandhi, Technical Analyst, StoxBox, said, “The current price structure is characterized by a formation of lower highs with no signs of recovery. We advise against bottom fishing at current valuations”.

The script traded lower than the 5-day, 10-day, 20-day, 30-day, 50-day, 100-day, 150-day and 200-day simple moving averages (SMA). The stock’s 14-day Relative Strength Index (RSI) reached 27.42. A level below 30 is defined as oversold, while a value above 70 is considered overbought.

According to the BSE, the stock has a price-to-equity (P/E) ratio of 30.55 versus a price-to-book (P/B) value of 10.29. Earnings per share (EPS) was 27.59 with a return on equity (RoE) of 33.69. The promoters held a 42.58% stake in Tata Motors as of the September 2024 quarter.