This Tata Group shares rallied 41% in just two trading sessions; here's why

Shares of Tata Investment Corporation Ltd, a Tata Group investment company, rose sharply in Monday's trade to scale their fresh one-year high level. The stock soared 17.74 per cent to hit a 52-week high of Rs 4,597.75. At this price, the scrip has zoomed 41.28 per cent in two consecutive trading sessions. The multibagger counter has ascended by more than 108 per cent in the last six months.

The strong upward move in the share price came on account of Tata Technologies Ltd's initial public offer (IPO), which is scheduled to open on November 22. Tata Tech is a subsidiary of Tata Motors. And, Tata Investment Corp is a promoter group entity in Tata Motors. The IPO would be the first by the Tata Group in nearly two decades.

Other than Tata Motors, Tata Investment owned stakes in at least six listed Tata firms including Tata Chemicals, Tata Consumer Products Ltd, Trent, Tata Elxsi, Tata Steel and Tata Consultancy Services (TCS).

The price band for Tata Tech IPO has been fixed at Rs 475-Rs 500 per share. Investors willing to apply for the issue could bid for a minimum of 30 shares and multiples of 30 shares thereafter.

The IPO would comprise of an offer for sale (OFS) of up to 60,850,278 shares including sale of up to 46,275,000 shares by Tata Motors Ltd, up to 9,716,853 shares by Alpha TC Holdings and up to 4,858,425 Equity Shares by Tata Capital Growth Fund I.

"Focusing on verticals like auto (75 per cent of overall revenue) and aero (part of others, 10 per cent of revenue), Tata Tech is a mid-size ER&D services company with ~$547 million revenue. It has long-term collaborations with anchor clients (Tata Motors and JLR, 40 per cent of auto revenue) and offers turnkey vehicle-development solutions for combustion & electric powertrains. Besides, it offers manufacturing cost reduction and after-sales solutions," said Anand Rathi in a note.

The brokerage expects Tata Technologies to see an improvement in Ebitda margins from the prevailing 18-19 per cent level and see offshoring and utilisation.

On technical setup, Tata Investment's counter was trading higher than the 5-day, 10-, 20-, 30-, 50-, 100-, 150-, 200-day simple moving averages (SMAs). The counter's 14-day relative strength index (RSI) came at 86.82. A level below 30 is defined as oversold while a value above 70 is considered overbought. The company's stock has a price-to-equity (P/E) ratio of 73.02 against a price-to-book (P/B) value of 0.84.

The scrip has a one-year beta of 0.2, indicating low volatility. Support on the counter could be seen around Rs 4,000 level.

"Tata Investment has soared over 40 per cent in the last couple of trading sessions ahead of the Tata Tech IPO. The company, being a promoter group entity of the auto major Tata Motors, is witnessing a strong traction. It has rallied to clock new highs on the back of strong trading volumes. However, after such a stellar rally, one should not become complacent and keep trailing profits with a pragmatic approach. For now, the support seems to be around Rs 4,200, followed by Rs 3,900-3,970 levels," said Osho Krishan, Senior Research Analyst - Technical & Derivatives at Angel One.

"As the current price action is trading way above all major daily exponential averages, there can be some profit booking in the coming sessions. If one has already bought, then trailing stop loss would be a sensible option. As we advance, Rs 4,000 would be credible support and resistance is seen Rs 4,800," said Jigar S Patel, Senior Manager - Technical Research Analyst at Anand Rathi Shares and Stock Brokers.

"Tata Investment is bullish but also overbought on daily charts with next resistance at Rs 5,024. Investors should book profits at current levels. Support will be at Rs 3,967," said AR Ramachandran from Tips2trades.

(Disclaimer: Business Today provides stock market news for informational purposes only and should not be construed as investment advice. Readers are encouraged to consult with a qualified financial advisor before making any investment decisions.)

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