Tata Motors demerger: Stock can potentially rally another 27%; hints chart

The stock Tata Motors has so far rallied 32 per cent in 2024, and a solid 145 per cent in FY24. Charts suggest that the bias is likely to remain bullish as long as the stock trades above Rs 975.

Shares of Tata Motors jumped over 5 per cent to a new life-time high of Rs 1,035 in intra-day deals on Tuesday after the auto major announced the demerger of its commercial vehicles and passenger vehicles.

With today's sharp gain, the stock has surged 32 per cent so far this calendar year, and was up a stunning 145 per cent so far for the fiscal year FY24. The buying has been so aggressive at the counter that the stock Tata Motors has ended with gains in 9 out of the 11 months so far. 

The board of Tata Motors Ltd (TML) on Monday after market hours approved a proposal to demerge the automobile maker into two separate listed companies. One entity will house the commercial vehicles (CV) business and its related investments, while the other will encompass the passenger vehicles (PV) businesses, including domestic PV, electric vehicle (EV), Jaguar Land Rover (JLR), and their related investments.

Brokerages believe the demerger seems to be a step in the right direction. However, they remain cautious on revising the price target given the sharp run-up at the counter. READ MORE

That apart, the auto maker alongside Mahindra & Mahindra and Ola Electric are set to receive another round of incentives as they take the lead in getting benefits under the government's production-linked incentive (PLI) programme.

These three firms were receiving subsidies under the ongoing Faster Adoption & Manufacturing of Electric Vehicles in India (FAME India) scheme, valid till this month.

According to officials, all eligible companies benefit from both the auto PLI incentives and FAME-II incentives. “Eligible entities will receive incentives from the auto PLI, and if these entities are already receiving benefits from FAME, they will continue to receive incentives until March 2024,” an official said. READ MORE

Against this backdrop, here's how the stock looks on the chart.

Tata Motors

Current Price: Rs 1,025

Upside Potential: 26.8%

Resistance: Rs 1,070; Rs 1,160

Support: Rs 975

The stock is trading on a buoyant note on multiple time-frames, with key momentum in fairly overbought zone on the medium and long-term charts. However, the Directional Index is still in rising mode both on the weekly and monthly charts, thus suggesting that any dips at the counter could attract aggressive buyers at lower levels.

As per the long-term charts, the bullish bias for the stock is likely to remain intact as long as stock sustains above Rs 975-level. As per the daily chart, the near-term support for the stock has risen to Rs 1,010 levels. CLICK HERE FOR THE CHART

The yearly Fibonacci chart suggests that Tata Motors can potentially rally to Rs 1,300 on the upside, with interim resistance seen around Rs 1,070 and Rs 1,160. 

On the other hand, In case of sustained trade below Rs 975, the yearly close of Rs 950 could act as an immediate support, below which the stock could dip to Rs 830 levels.