Shares of Tata Motors rallied 8.87 percent to close at Rs 120.30 on August 27 after a media report indicated that China may be considering to remove or relax restrictions on auto purchases.
The stock gained nearly 10 percent intraday, but lost more than half of its value in last one year and shed nearly 80 percent in last three years.
"China considers relaxing, removing restrictions on auto purchases. Country may remove car purchases limits," Edelweiss said in its alert.
Tata Motors has a joint venture agreement with Chery Automobile Company in China, through which company manufactures and sells certain Jaguar Land Rover vehicles.
The auto slowdown has been hurting not only China or India but other countries globally. New emission norms in Europe, US-China trade tensions, overall auto slowdown, etc. hit JLR sales for many quarters now, which as a result the company reported losses amid lower realisation.
JLR posted a loss of 402 million pounds in the quarter ended June 2019 against loss of 210 million pounds in the same period last year as revenue declined 2.83 percent year-on-year to 5,074 million pounds and retail volumes fell 11.6 percent YoY to 1.28 lakh units.
"Lower volumes were due to weaker market conditions, runout of prior model Discovery Sport and China Evoque and WLTP delays," the company had said in its quarterly report. China's retail sales volumes in June quarter 2019 dropped 29.2 percent YoY.
The sharp rebound seen in stock price today also could be due to relief measures announced by Finance Minister on August 23 and long buildup.
One-time registration fees deferred till June 2020 and additional depreciation increased to 30 percent on vehicles purchased up to March 2020 among measures for auto sector announced by FM Nirmala Sitharaman.
The traded volumes also increased by 32 percent to 7,06,36,441 shares compared to its five-day average of 5,31,73,551 shares on the NSE and the market capitalisation rose by Rs 2,830 crore.