Tata Motors faces wrath of fund managers in September

Fund managers sold 20 million shares of the automaker, worth ~802 crore

This September, when leading commercial vehicle manufacturer Tata Motors was set to launch the Nexon, its muchawaited mini special utility vehicle, domestic fund managers were busy liquidating the company's stocks from their portfolios.

The fund managers sold 20 million shares of Tata Motors worth ~802 crore during the month, making it one of the most-sold stocks in September. This is the first time the stock has figured in the most-sold list in several months. Despite the heaving selling by MFs last month, the Tata Motors stock has managed to do well in October. The scrip is up close to 10 per cent. On Wednesday, it closed at ~433.55.

Earlier this year, fund managers have been either adding or holding on to Tata Motors with a view of a turnaround in the company by the end of this financial year. For instance, during March-April, when shares of Tata Motors were trading around ~440-480 levels; fund managers added 18 million shares worth ~840 crore. In August, when the stock fell to as low as ~374, fund managers were quick to lap up eight million fresh shares worth ~300 crore — suggesting the company revival continued to be on track.

However, as the stock hit ~400 apiece in September, heavy selling was witnessed by fund houses such as ICICI Prudential Mutual Fund (~374 crore), Aditya Birla Sun Life Mutual Fund (~493 crore) while DSP Black Rock MF completely exited the counter. Meanwhile, Reliance Nippon MF and Franklin Templeton MF were the buyers of Tata Motors as they stocked up shares worth ~355 crore.

“As a company, Tata Motors has no problems as such. Its products are good, new sets of launches are underway and recent products have been doing quite well in the domestic market. But, when it comes to the stock price, it appears to be going nowhere. Issues such as exchange rates and strikes at local facilities keep popping up. And the company is still struggling to have customeroriented sales and services. We chose Eicher Motors, Mahindra & Mahindra and Maruti Suzuki over Tata Motors as I see growth in these companies,” said the chief investment officer (CIO) of mid-sized fund house.

According to a CIO of a large fund house, “Tata Motors as a company, no doubt, is in corrective mode when it comes to its products and sales strategy. But, the company may continue to feel pain for another two-three quarters. Now, the question is whether we need to wait or partially move to other available peers which can add up to growth in our portfolios. Shunning the counter altogether, of course, can't be a wise move.”

It is to be noted that amid this year’s rally in stock markets, fund managers have been increasingly finding it difficult to outperform their benchmarks with a wide margin. As a result they are not shying away from taking short-term or “momentum calls” on certain stocks.

“Our exposure to Tata Motors was more on account of a short-term trade call. Having said that I am not denying that there is no value in the company at current price — it is relatively under-priced. But to show performance, sometimes profit-booking at a short duration is important,” said a senior equity head at another large-sized fund house. Currently, there are 281 mutual fund schemes which have allocation to shares of Tata Motors with a total investment of ~5,963 crore.