Mutual Funds Buy ₹12,000 Cr in Tata Motors Shares in August Surge

Mutual funds took advantage of Tata Motors' stock correction in August by purchasing shares valued at over ₹12,000 crore. The stock had declined more than 12% during the first week of August, following a cautious outlook from the company’s management, which pointed to weaker global demand for the remainder of the fiscal year.

In August, mutual funds acquired around 11 crore shares of Tata Motors, after offloading about 1.6 crore shares worth ₹1,685 crore in July. Out of the 37 mutual funds invested in the automaker, 32 increased their stake in August, while five reduced their holdings.

ICICI Prudential Mutual Fund led the buying spree with purchases amounting to ₹3,932 crore, followed by SBI Mutual Fund and Invesco Mutual Fund, which invested ₹3,058 crore and ₹1,044 crore, respectively. Other significant buyers included Kotak MF, UTI MF, Franklin Templeton MF, and HDFC MF, purchasing shares worth ₹780 crore, ₹525 crore, ₹485 crore, and ₹432 crore, respectively. Several other mutual funds also made purchases ranging from ₹100 crore to ₹430 crore.

By the end of August 2024, mutual funds collectively held about 41.88 crore shares of Tata Motors, a notable increase from 30.64 crore shares in July. The value of these holdings rose to ₹46,543 crore from ₹34,053 crore, according to data from ACE Equities.

In its post-earnings commentary, Tata Motors highlighted that while international demand is expected to remain subdued, the company anticipates a gradual recovery in the domestic market, driven by new product launches and the upcoming festive season.

Tata Motors' global CFO, PB Balaji, indicated that while global demand may stay soft, the domestic market shows promise, supported by infrastructure investments, favorable economic conditions, a strong monsoon, and new product launches.

Despite a drop in passenger vehicle sales during the June quarter, the company remains optimistic about a recovery in the domestic market. However, Nuvama expects the commercial vehicle segment to remain under pressure due to lower infrastructure spending.

In addition to Tata Motors, mutual funds were also seen investing in other auto stocks following market corrections in August. Mutual funds purchased ₹1,147 crore in Maruti Suzuki India Ltd, ₹1,009 crore in Eicher Motors, and ₹258 crore in Mahindra & Mahindra (M&M).

The correction in auto stocks followed price cuts by major automakers, aimed at clearing unsold inventories amidst weak demand. Last month, M&M reduced the price of its XUV700 SUV by ₹2 lakh to mark its third anniversary, while Tata Motors also cut prices for its Harrier and Safari SUVs, now priced at ₹14.99 lakh and ₹15.49 lakh, respectively, with additional benefits of up to ₹1.4 lakh on select variants.

These price cuts are part of automakers’ efforts to reduce unsold inventories, which are estimated at around ₹60,000 crore. The upcoming monsoon season is expected to further impact demand. According to FADA, passenger vehicle sales declined by 6.77% year-over-year and 7.18% month-over-month in June, with inventory levels hitting a high of 62 to 67 days.

In another development, Tata Power EV Charging Solutions, a subsidiary of Tata Power Renewable Energy, signed a Memorandum of Understanding (MoU) with Tata Motors to establish 200 fast-charging stations for electric commercial vehicles (CVs) across major metro cities.

Tata Power Company’s stock rose by 1.58% to ₹446.75, while Tata Motors saw a 1.28% increase to ₹998.70 on the BSE. Tata Power EV Charging Solutions is a subsidiary of Tata Power Renewable Energy, which in turn is a subsidiary of Tata Power Company.

This partnership expands their ongoing collaboration in promoting sustainable mobility solutions, particularly by offering convenient charging options for small electric commercial vehicles.

Tata Motors and Tata Power will offer exclusive charging tariffs for Tata Motors' electric CV owners, potentially reducing operating costs and boosting profitability. With this initiative, electric CV users across the country will soon have access to nearly 1,000 strategically placed fast chargers, thanks to the expansion of the charging network.

Deepesh Nanda, CEO & MD of Tata Power Renewable Energy, stated, "Tata Power has been empowering electric vehicle owners through its extensive and accessible charging network across the country. With a presence in various segments such as public, semi-public, bus/fleet, and home chargers, we are now expanding into the commercial vehicle charging sector to provide integrated solutions. This partnership reinforces our commitment to accelerating e-mobility by delivering a wide-reaching and dependable EV charging network across India."

Vinay Pathak, Vice President & Business Head SCV&PU at Tata Motors, added, "We are excited to strengthen our collaboration with Tata Power to revolutionize the electric commercial vehicle space by ensuring convenient access to fast chargers nationwide. Additionally, this partnership will explore opportunities to maximize the use of renewable energy, making electric vehicle operations even more environmentally friendly."