Tata Motors shares turn green; can the multibagger recover from correction blues?

Shares of Tata Motors ended in the green on Thursday after nine straight sessions of losses. The recovery in the Tata Group stock came after Sensex and Nifty staged a stellar rally in the second half of trade. After trading in the red, the stock surged in line with the benchmark indices. It closed 1.03% higher at Rs 986.05. The stock had lost 13% in the nine preceding sessions to Thursday. Market cap of the firm rose to Rs 3.62 lakh crore on Thursday. On BSE, around 11 lakh shares changed hands amounting to a high turnover of Rs 106.93 crore in the previous session.

The multibagger auto stock has climbed 58.84% in a year and risen 230% in three years. Tata Motors stock has a one-year beta of 1, indicating very average volatility during the period.

Shares of Tata Motors hit a record high of Rs 1179.05 on July 30 this year and fell to their 52-week low of Rs 608.45 on October 4, 2023.

However, the stock is still down 16% from its record high till date. In terms of technicals, the relative strength index (RSI) of Tata Motors stood at 34.3, signaling it's trading neither in the overbought nor in the oversold zone.

Tata Motors shares are trading lower than the 5 day, 10 day, 20 day, 30 day, 50 day, 100 day, 150 day but higher than the 200 day moving averages.

With minor recovery after the short phase of correction, can the stock reverse the downfall decisively or will it remain volatile in the short term?

Global brokerage UBS has assigned a 'Sell' call to the auto stock with a target of Rs 825. The brokerage said Range Rover, Defender and Range Rover Sport are the premium models of Jaguar Land Rover (JLR) that have contributed to a rise in the Tata Motors UK arm's average selling price (ASP) and gross margin.

"With JLR's order backlog already below pre-COVID and incremental bookings lagging supply, we would not be surprised if the incentives for Range Rover—JLR's apex model— start rising soon from near-zero levels. Rising discounts, moderating growth and a lack of any new ICE/hybrid launch could result in significantly weaker financials for FY26, even if consensus extrapolates the last two years' results," UBS said.

Mandar Bhojane, Equity Research Analyst, Choice Broking is bullish on the stock in the short term.

"Despite showing some short-term weakness, as indicated by a minor breakdown, the stock remains in an overall bullish trend. The recent price drop in Tata Motors brought close to its Bollinger Band's lower boundary and the 50-day Exponential Moving Average (EMA), both of which are providing additional support. Importantly, the stock continues to trade above its 200-day EMAs, reinforcing the longer-term bullish outlook. Short-term targets are in the range of Rs 1,120–Rs 1,200. Accumulating at these levels may prove beneficial. For both traders and investors, this presents an attractive opportunity, as the stock continues to show resilience within its bullish framework, despite recent dips," Bhojane said.

Om Mehra, Technical Analyst SAMCO Securities said, "On the daily chart, a double bottom pattern is forming, suggesting potential support may emerge soon. The volume has decreased in the week which indicates the lower market participation. This weakening momentum points to a cautious outlook. However, the Rs 1,000– Rs 1,020 range could offer a favorable entry point for long positions and would present a better risk-reward scenario. If the stock reverses from these levels, there is a potential upside toward the Rs 1,100–1,130 zone."