 "Brokers keep faith amid Tata fall")
Nearly a fortnight after the change of leadership at Tata Sons, the stock of Tata Motors is the first within the Tata group to witness a major rerating from a prominent brokerage. On Monday, international brokerage Credit Suisse upgraded Tata Motors to ‘outperform’ and increased its target price to Rs 720 (from Rs 510 earlier), sending the stock 6.5 per cent higher in a single trading session. But, even with Tuesday's closing price of Rs 540, the target price indicates further potential of 33 per cent.
Experts believe the timing of Credit Suisse's upgrade is noteworthy and it indicates continued brokerage optimism on Tata group stocks. But, look at the performance of these stocks since October 24 (when Ratan Tata replaced Cyrus Mistry as chairman of Tata Sons), and you will see the group stocks have underperformed the Sensex significantly. The Sensex declined two per cent in this period, but stocks of Tata Consultancy Services (TCS), Tata Steel, and Tata Motors lost 3.5-6 per cent. The fall is steep for Tata Communications, Tata Power, Indian Hotels, and Tata Global Beverages, all down 11-17 per cent since October 24.
Despite this, experts urge investors not to sell Tata group stocks in a hurry. “Ten days is too short a time for us to judge what’s happening in the group,” says Ajay Bodke, chief executive and chief portfolio manager at Prabhudas Lilladher. “There isn’t as much uncertainty as feared earlier,” says Deven Choksey, managing director, KRChoksey Investment Managers.
Most experts agree, citing underlying business fundamentals of the companies.
“Companies such as Tata Motors and TCS are good franchises that can function irrespective of the chairman of Tata Sons,” says another expert who heads the research desk of a domestic brokerage. Choksey says the same about the two stocks: “I don’t think this sort of uncertainty will last long and investors should use any decline in the price of Tata group stocks to increase their exposure to them.”
Choksey finds echo among analysts, whose ‘buy’ recommendation, according to Bloomberg data, on stocks such as TCS, Tata Steel, Tata Power, Tata Communications, and even Indian Hotels, which was recently in limelight for weak results, has not changed since October 24. Interestingly, analysts’ sentiment on Titan and Tata Chemicals has improved in the last fortnight despite ongoing clash over leadership within the group. Rallis India is only one among Tata group stocks to see some rollback in sentiment. Repeating analysts’ views, Pankaj Pandey, head of retail research, ICICI Securities, says his brokerage hasn’t changed the outlook or estimates on Tata group stocks. “We are waiting for more clarity. If there is any change in stance on debt reduction of the group, there could be some change in approach,” he says. Another expert who heads an institutional trading desk said that for now it is business as usual with the Tata group stocks. “We are taking a view on these stocks based on a sector approach and lineage doesn’t matter to us now,” he says. The only warning is a prolonged boardroom battle between Tata and Mistry could frighten the Street.