 "An employee writes on a register inside the Tata Motors car showroom in Ahmedabad")
Heavy selling of Tata Motors' shares in May because of concerns over Brexit has proved to be a wrong call on the part of domestic mutual fund managers. With looming uncertainties on the automaker's earnings in the backdrop of Britain's referendum on exiting the European Union (EU), fund managers sold Tata Motors' shares worth Rs 1,025 crore last month, data show.
Interestingly, the month saw Tata Motors trade below Rs 400 levels for a majority of the sessions only to rise in the past two days as the company reported good numbers in the quarter ended March. In fact, Tata Motors was the most liquidated stock in fund managers' portfolios with selling of around 22 million shares. The scrip lost its position among the top 10 most owned stocks by fund managers and slipped one notch down.
However, what followed later was least expected as the share price kept galloping and hit a 52-week high of Rs 486 on Tuesday. This is an increase of about 23 per cent against the average closing price in the previous month.
"The Brexit development called for a review of our holdings in Tata Motors as the company gets a big chunk of its revenues from Jaguar Land Rover (JLR). However, we took a conscious call and went ahead with a partial selling of our holdings, instead of completely exiting the counter. We are public money managers and can't afford to take undue risks, which may or may not come," said chief investment officer (CIO), who didn’t wish to be named.
JLR reports its numbers in GBP and the outcome of referendum is likely to deeply hurt the pound vis-à-vis the US Dollar, which, in turn, may influence Tata Motors' earnings.
Another top equity head, who is bullish on Tata Motors, said: "We had recently met the company and after that we actually increased our buying. I am not denying the fact that Brexit may have a knee-jerk reaction on the company and its shares. However, we understand that the company is likely to do better on the commercial vehicles front and recent passenger car launches have been received well by the market."
After Tata Motors' Q4 numbers were released, several brokerages' research reports increased the target with a buy call. CLSA put the target of Rs 545 and Prabhudas Lilladher gave a target of Rs 503. What is worth mentioning is the fact that many fund managers who turned sellers have brought Tata Motors back on their buying radar, an example of selling low and buying high; something against which fund managers keep educating investors.
Some equity schemes that have exposure to Tata Motors include Equity Opportunities Fund, HDFC Top 200, Birla Sun Life Frontline Equity, Franklin India Bluechip, DSP BlackRock Focus 25 Fund, Axis Equity Fund and ICICI Prudential Select Large Cap.
As on May 31, about 1.43 per cent of equity assets or Rs 4,931 crore found its way into stocks of Tata Motors with an overall holding size of 129 million shares in fund managers' portfolios.
