Stocks of Tata Motors slump as JLR operating margins drop

The stocks of Tata Motors, one of the leading car makers of India, went down by 11.9 per cent as the automotive major released quarterly earnings that did not meet market expectations. This drop in stock on May 30 2012, which is attributed to the reduced operating margins of the company's Jaguar Land Rover division, deducted 1.5 billion from the company's value. The situation also spread a wave of caution in the market a day ahead of the Gross Domestic Product (GDP) data as well as expiry of derivatives.

Following this development in the company's stocks, the primary 30-share Bombay Stock Exchange (BSE) index dropped 0.77 per cent and stood at 16,312.15 points at the end of the day. This effectively eliminated the all the positives of two sessions of gains. Likewise, a slump of 0.79 per cent was witnessed in the broader 50-share National Stock Exchange (NSE) index, which contracted by 0.79 per cent and ended the day at 4950.75 points.

According to Prakash Diwan, Head, Institutional Clients Group, commented, “Markets are looking interesting to short, as more rupee weakness is in the cards. Nifty can touch 4,700 in next few weeks in absence of any positive triggers.”

With this fall in stocks, the company recorded its largest decline in daily percentage since April 2009, although a few analysts say that the stocks are oversold. On this, Diwan commented, “Tata Motors is oversold, expectations were too high. I expect further sales by Tata Motors to come on higher margins.”

As the Indian National Rupee (INR) inched towards its all-time low and Asian shares witnessed a decrease, the overall market sentiment remained negative. Both of these factors are attributed to the ever-increasing concerns about the banking troubles of Spain and its debt yields. The risk-averse stance of the whole world is being seen when the investors are already showing great concern regarding the economic as well as the fiscal standing of India.

The government-owned gas utility GAIL India Limited saw a decrease of 1.4 per cent as its net profit failed to meet the market projections and contracted in the first three months of 2012. Companies that did well on the stock market recently are also facing a slump now. The shares of State Bank of India (SBI) are down by 1.04 per cent after growing 9.4 per cent in the last five sessions, while those of ICICI Bank have declined by 2.56 per cent.