Is Tata Motors still a better pick?

Tata Motors on Wednesday, had one of the best days witnessing 20 per cent move in a single day. The stock was at a decade low of Rs 63.5 on March 24, 2020, before heading northwards. However, is there any juice remaining? Let’s have a look at it.

Tata Motors has raised USD 1 billion (Approx. Rs 7,500 crore) from TPG Rise (TPG Rise Climate Fund) and ADQ by selling an 11-15 per cent stake of its India EV business (EVCo). Going by the agreement, TPG Rise Climate and ADQ will be investing in a newly incorporated subsidiary of Tata Motors. The valuation of the same is likely to be pegged at USD 6.7 – 9.1 billion. Over the next five years, EVCo will be investing more than USD 2 billion (Approx. Rs 16,000 crore) in dedicated EV manufacturing, products, platforms, drive trains, charging infrastructure and advanced technologies.

Tata Motors Ltd has underperformed the Nifty Auto index in the past five years. In fact, it was in the year 2016 when it made a high of Rs 598.4, post which it started its southward journey. At today’s close, it is still roughly 100 points (20 per cent) away from the high made in 2016.

On long-term Fibonacci extension, the stock’s price is trading above 78.6 per cent level. Sustenance of this level would likely open doors for Rs 600 levels. Having said that, in today’s trade we have seen some profit booking coming in. This is more evident in the below chart.

Looking at weekly charts, the price is very well trading above its 9-week, 20-week and 50-week Exponential Moving Average (EMA). Moreover, even the Relative Strength Index (RSI) and Moving Average Convergence Divergence (MACD) are supporting the move. RSI presently is standing at 83, whereas last week MACD made a positive crossover in the positive territory depicting the strength of the up move.

To conclude, those investors who already hold Tata Motors shares should stay put and those looking for opportunity should watch out for Rs 505 levels.

In Thursday's trading session, the open and high of the stock stood at Rs 530, made a low of Rs 492, before closing at Rs 497.6.