Mumbai, Jan. 9: Car sales may have gone into a skid this year but that hasn't clouded the prospects for Tata Motors which leapt to a one-year high on the bourses today after foreign brokerages upgraded the stock to a buy.
On the Bombay Stock Exchange (BSE), the scrip hit a new 52-week high of Rs 329.90 after opening at Rs 318. The share, however, closed off its highs at Rs 326.65, still higher by 3.98 per cent, or Rs 12.50, over Tuesday's close.
Market circles said the strong buying in the counter came on the back of positive comments from two brokerages ' CLSA and Credit Suisse.
CLSA upgraded the stock to a buy from outperform and said growth at the company would come from Jaguar Land Rover (JLR). The brokerage said product launches from JLR coupled with better demand from China would spur volumes at the Tata Motors' subsidiary which is projected to grow at a compounded rate of 11 per cent between fiscal years 2013 and 2015.
Tata Motors had acquired JLR in 2008. The buyout has paid rich dividends with the latter driving the company's performance at a time when business in India has been hit by high interest rates and the economic slowdown in addition to the rising cost of ownership.
In its report, CLSA upgraded its 2014-15 earnings per share estimate for Tata Motors by up to 8 per cent even as it forecast that the commercial vehicle cycle in India would improve by 2014-15. However, it indicated that the passenger vehicle business would continue to face challenges.
The rise in Tata Motors stock came on a day when auto industry body, Society of Indian Automobile Manufacturers (SIAM), cut its car sales forecast for the current fiscal. This is the fourth time that it has revised its estimate. SIAM today said that sales growth in the industry would be a meagre zero to 1 per cent which is significantly lower from the initial estimate of up to 12 per cent.
"Based on the third quarter performance, SIAM is revising the projections. There are significant changes in expectations based on performance of all segments till date," SIAM President S Sandilya said told reporters in the capital. He added that there were no signs of growth in the sector due to the economic slowdown, inflation, high vehicle finance and fuel prices, and differential excise rates.