Tata Motors Share Price Climbs Nearly 3 Per Cent, Nifty Auto Gains Over 1 Per Cent - Know Why

Tata Motor Share Price: Shares of domestic automotive companies gained in early trade on May 26. The gains made by Tata Motors and Ashok Leyland shares buoyed the Nifty Auto index. The Nifty Auto index extended gains, surging 1.38 per cent to an early high at 23,839.85 level. At the time of writing, 10 out of the 15 constituents of the Nifty Auto index traded in the green.

Why Are Auto Stocks Gaining

In early trade, shares of Tata Motors and Ashok Leyland gained on the back of stock-specific triggers. Other major tailwinds for the automotive space included Japan emerging as one of the key export destinations for Made-in-India cars in FY 2024-25. In the first nine months of FY 2024-25, shipments of Made-in-India cars to Japan grew to $616.45 million from $220.62 million in FY24, according to SIAM's analysis of data by the Ministry of Commerce.

VK Vijayakumar, Chief Investment Strategist, Geojit Investments Ltd told Outlook Money that auto stocks are likely to benefit from multiple factors such as the income tax-cut announced in the Union Budget earlier in February 2025 along with a downward trend in interest rates.

“Demand for 2-wheelers are  showing distinct improvements. PVs and SUVs particularly in the EV segment are likely to do well. The positive impact of the income tax cut provided in the Budget will be felt in the coming quarters.  A significant factor which can boost auto sales going forward is the downward trend in interest rates. CPI inflation is expected to decline to below 3 per cent soon facilitating three more rate cuts this calendar year. Since auto demand is interest elastic this can further boost auto demand. Further more, declining commodity prices can boost the margins of the auto industry,” Vijayakumar told Outlook Money.

Major constituents of the Nifty Auto index in terms of weightage, such as Tata Motors, Maruti Suzuki India Ltd, and Mahindra & Mahindra, traded up to 2.57 per cent higher. Tata Motors' share price surged nearly 3 per cent to Rs 738 apiece on the NSE.

Tata Motors shares gained after US President Donald Trump announced a delay in the imposition of proposed 50 per cent tariffs on the European Union. Trump has delayed tariff imposition till July 9. Earlier last week, the US President announced that 50 per cent tariffs will be imposed on the European Union from June 1. Notably, the 90-day pause on US reciprocal tariffs is also expected to end on July 9. Tata Motors' Jaguar Land Rover (JLR) brand is dependent on the US Market for a significant part of its revenue. At the time of writing, Tata Motor's share price pared some of the gains to trade at Rs 731.9 apiece on the NSE.

Ashok Leyland's share price gained nearly 1 per cent to Rs 241.81 apiece on the NSE. The stock gained after the company delivered its highest-ever quarterly and annual revenues, earnings before interest tax depreciation and amortisation, and profit-after-tax. Ashok Leyland's consolidated revenue for the March quarter surged by over 8 per cent to Rs 14695.65 crore in the March quarter of FY25 from Rs 13542.37 crore in the corresponding quarter of the preceding fiscal.

The company's profit-after-tax also surged over 33 per cent to Rs 1245.92 in the quarter under review from Rs 933.69 crore in the March quarter of the preceding fiscal. Ashok Leyland's revenue from operations for FY 2024-25 to Rs 38,753 crore from Rs 38,367 crore in the preceding fiscal. The automotive company's profit-after-tax for FY25 grew by 28 per cent to Rs 3,303 crore from Rs 2,618 crore in FY24.

Shares of Ashok Leyland were also in focus after the company declared a second interim dividend for the current fiscal of Rs 4.25 per share. The company also approved the issue of bonus shares in the 1 : 1 ratio. At the time of writing, shares of the company pared the gains to trade at Rs 237.81 apiece, down by 0.75 per cent.

At the time of writing, shares of Bajaj Auto, MRF, and Hero Motocorp traded higher by as much as 2.39 per cent on the NSE. Shares of Samvardhana Motherson, Eicher Motors, Exide Industries, Bharat Forge, and Bosch Ltd. gained as much as 1.12 per cent. On the other hand, shares of TVS Motors, Tube Investments of India Ltd and Balkrishna Industries Ltd declined as much as 5.98 per cent.

Ajit Mishra – SVP, Research, Religare Broking Ltd told Outlook Money that investors who wish to increase their exposure to automotive stocks can consider focusing on sector leaders with robust fundamentals. Mishra also advised investors to diversify their investments in the space across two wheelers, passenger vehicles and auto ancillaries.

“Investors should focus on sector leaders with robust balance sheet, gaining market share, strong cash flows, and net debt free. Further, it’s better to diversify across auto sub-segments like passenger vehicles, 2W, commercial vehicles, and auto ancillaries can help manage cyclical risks,” Mishra said.

Somil Maskara, Head of Research at Wallfort Financial Services Ltd told Outlook Money that investors can consider gradually adding quality companies on dips.

“In a volatile market, we suggest that investors should gradually add quality companies on dips. The sectors long-term fundamentals remain strong, supported by factors like favourable geo political ties with US and UK & healthy rural demand. We recommend that investors should use such volatility to their advantage by focusing on companies which have strong earnings visibility & market leadership,” Maskara said.