One of the Biggest advantages of Black swans and Economic crises is that, they bring out the problems and issues which otherwise could’ve went unnoticed. Major Scandals, Bankruptcies and defaults often take place during the period of crises. There’s no reason to think – “This time is going to be different”. The Covid-19 crisis, no doubt, will beat down some of the most inefficient companies into deep trouble. (That’s why Smart money players are more concerned about the after effects of crisis and lockdown rather the crisis itself.) Contextually speaking, one among such companies could be Tata Motors!
As most of the Market participants are focused on guessing the Stock Market bottom, a quiet problem is looming around the corner in Tata Motors. First and foremost the Share prices are already in a free-fall, ever since the beginning of 2017. If you look at the monthly chart, you can clearly spot the Structural downtrend. Another important point is Stock prices recently broke the long-standing and historically most significant trend line. Take a look at this Chart
Tata Motors – Price Action Analysis on Long Term Cycles
Apart from that, Fundamental problems such as decreasing sales, increasing debt, lower profit margins and High competition are already impacting the share value and Investor confidence. The Structural downtrend that you can witness on the Stock prices is mostly a result of these factors. Given the underlying facts, one can clearly understand that Tata Motors was not in a favorable position, even before the crisis. Now adding to the twist, think what will be the impact of lockdowns and post lockdowns on company’s performance ! Doesn’t give a rosy picture, right?
Based on these things, one can wonder – Is Tata motors technically in a similar situation that Yes Bank and other companies faced nearly a year ago? Then what would happen to Stock Prices? If that’s the case, then company might undergo into a lot of deep troubles. History just repeats again!
Keep in mind, predictions and forecasts don’t work out all the time, so there’s a possibility, this speculative insight could turn out to be wrong. But as a trader, we shouldn’t be focusing on getting it right, instead if things start to play out as per the insight then seize the opportunity by looking for downside trades. In either case it’s going to be interesting, so keep this stock under your radar.
