Tata Motors stock jumps 5% today; Should you buy or sell?

Tata Motors share price rallied over 5 per cent on Wednesday's trading session to ₹1,129.20. The stock went intraday high to ₹1,137 on August 29. This happened a day after the company announced trading in its differential voting rights (DVR) shares will stop after market hours on Friday, August 29, due to the conversion of these DVR shares into ordinary shares.

The company intends to cancel the DVR shares, which have been listed since 2008, and replace them with ordinary shares. Investors holding 10 DVR shares will receive 7 ordinary shares in exchange.

The company had previously designated September 1 as the record date for this share exchange.

“In pursuance of Regulation 3.1.2 of the National Stock Exchange (Capital Market) Trading Regulations Part A, it is hereby notified that the following security will be suspended from trading w.e.f. August 30, 2024 (i.e., closing hours of trading on August 29, 2024),” said the company in a filing to the exchanges.

On Tuesday, Tata Motors announced that it had received approval from the National Company Law Tribunal (NCLT) in Mumbai. The Tribunal approved the company's plan to reorganize its share structure by canceling its 'A' Ordinary Shares and issuing new Ordinary Shares in their place.

Over the past two years, Tata Motors DVR shares have delivered impressive returns of 223.6 per cent. In the last year alone, the stock has surged by 86.6 per cent. Additionally, in the last six and three months, the stock has provided returns of 17 per cent each to its investors.

Tata Motors DVR shares are a distinct type of equity share that provide differential voting rights. These shares were initially introduced by Tata Motors to raise capital while maintaining the voting power of existing shareholders.

Should you buy or sell?

Brokerage firm Choice Broking has given ‘buy’ rating with a target price of ₹1,205-1,260.

"Tata Motors is currently trading at 21099 and has recently broken out of a rounding bottom pattern. signaling a reversal and a strong bullish trend. A breakout above 21100 could drive the stock towards the 21205 and 21260 levels, with immediate resistance at 21170. On the downside, 21010 and 2990 are critical support levels.

Additionally, after a prolonged correction, the stock has reversed from its support level. The Relative Strength Index (RSI) is currently at 57.8, suggesting an upward trajectory and increasing buying momentum. Based on these technical indicators, a prudent strategy would be to consider buying opportunities on dips around the 21075 and = 1095 levels

In summary. technical analysis and current market conditions indicate that Tata Motors presents a promising buying opportunity for those targeting the 21205 and ‹ 1260 price objectives. It's essential to apply prudent risk management strategies to navigate potential market fluctuations," the brokerage firm said.