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Tata Motors tanks 12% on JLR concerns

MUMBAI: Tata Motors slumped nearly 12% on Wednesday, leading a fall in the broader market as a steep decline in operating margins at JLR ignited concerns over the sustainability of the auto firm’s recent rapid growth.

The fall wiped out Rs 8,700 crore in market capitalisation on Wednesday.

Though the Mumbai-based company’s fiscal fourth quarter profit had more than doubled, operating margins at JLR fell to 14.6% from 20.1% on a quarter-to-quarter basis.

“Overall earnings were inline with expectations but the mix was adverse as India business rebound looks unsustainable given unfavourable macro,” Morgan Stanley said in a note, according to Reuters. Morgan cut its price target to Rs 291 rupees from Rs 313. UBS also cut its 12-month price target to Rs 270 from Rs 320 and maintained its “sell” rating on the stock, Reuters added.

Standard Chartered, reported Bloomberg, has cut its investment rating on the stock to the equivalent of a hold while IIFL cut its EPS estimate on the stock by 6-7% and its target price to Rs 300 from Rs 330.

“The high expectations had been built into the stock, have started wearing off. Aggressive shorts are being built,” said Siddarth Bhamre, head – equity derivatives at Angel Broking. Tata shares ended Wednesday at Rs 243.35, down 11.8%.

The Sensex declined 0.7% to Rs 16312.15 and the Nifty shed 0.8% to Rs 4950.75. The rupee fell 55 paise to 56.23 versus the dollar on month-end dollar demand by importers and a fall in the euro to a near two-year low of $1.24383 on worries of Spain’s ailing banking sector. Europe is India’s largest trading partner.”We are taking cues from global markets completely at this stage,” said Rajat Rajgarhia, director-research, Motilal Oswal Securities.

A renewed fall in the rupee to near record lows contributed to the weak sentiment, as did the fall in Asian shares, both because of intensifying worries about Spain’s banking woes and its debt yields.

The global risk aversion has come at a time when investors are already worried about India’s economic and fiscal outlook. The country is expected to say on Thursday the economy grew at 6.1% in the January-March.

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Posted by on May 31 2012. Filed under Automobile News. You can follow any responses to this entry through the RSS 2.0. Both comments and pings are currently closed.

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