Shares of Tata Motors (NSE: TATAMOTORS) continued their upward trajectory for the second consecutive day, gaining as much as 3% in intraday trading on Thursday. This surge follows a report by The New York Times suggesting an imminent trade agreement between the United States and the United Kingdom. Coupled with the recently finalized Free Trade Agreement (FTA) between India and the UK, and positive momentum from the approval of the company’s demerger plan, investor confidence in the automotive giant appears to be strengthening significantly. Â
As of 12:30 PM IST, Tata Motors’ stock price reached an intraday high of ₹704.00 on the Bombay Stock Exchange (BSE), marking a 3.45% increase. This two-day rally has seen the stock climb by an impressive 8.6%, making it one of the top gainers on the Nifty 50 index.
US-UK Trade Deal Hopes Fuel JLR Prospects
The primary driver behind today’s gains appears to be the anticipation of a US-UK trade deal. While the specifics of the potential agreement remain undisclosed, reports indicate that a formal announcement could be made soon. Earlier, a hint on social media by a prominent US figure about a “major trade deal with representatives of a big, and highly respected, country” further fueled speculation, with many interpreting this to involve the UK.
For Tata Motors, any easing of trade barriers between the US and the UK would be particularly beneficial for its wholly-owned subsidiary, Jaguar Land Rover (JLR). The US market accounts for a substantial 20% of JLR’s revenue. Earlier in the year, JLR had temporarily suspended shipments to the US following the imposition of a 25% tariff on auto imports. While reports suggest that shipments have since resumed, a more favorable trade regime could significantly reduce financial pressures and enhance JLR’s competitiveness in a key market.
India-UK FTA Adds to Positive Sentiment
Adding to the buoyant investor sentiment is the recently signed India-UK FTA. This landmark agreement is expected to significantly reduce tariffs on premium car imports into India, potentially slashing duties from over 100% to just 10% under a quota system. This development is poised to create new growth opportunities for JLR within the Indian market, making its luxury vehicles more competitively priced and potentially boosting sales volumes.
Demerger Plan Receives Shareholder Approval
Further bolstering investor confidence is the recent approval granted by Tata Motors’ shareholders for the demerger of its Commercial Vehicle (CV) business into a separate, publicly listed entity. This strategic move, which received near-unanimous support, is seen as a positive step towards unlocking shareholder value by allowing both the CV and the Passenger Vehicle (PV) businesses (including JLR) to pursue independent growth strategies with greater focus and agility. Existing Tata Motors shareholders will receive one share of the new CV entity for each share they currently hold.
Analyst Outlook
Market analysts suggest that these interconnected positive developments – the potential US-UK trade deal benefiting JLR, the India-UK FTA opening new avenues in the domestic market, and the strategic demerger – are collectively contributing to the renewed interest in Tata Motors’ stock. The company’s proactive steps in navigating global trade dynamics and its internal restructuring efforts appear to be resonating well with investors.
Market Response
The strong upward momentum in Tata Motors’ share price over the past two trading sessions, with a cumulative gain of approximately 9%, reflects the growing optimism surrounding the company’s future prospects. Investors will be closely watching for further official announcements regarding the US-UK trade deal and the implementation of the India-UK FTA to gauge the full extent of their impact on Tata Motors’ performance.