Tata decision holds no threat for markets
Effect on Indian stocks would be limited to a ‘short-term pain’, if at all
Singapore (Bloomberg): The Tata Group’s shock defeat in India’s biggest corporate feud will hardly have any impact on the record-breaking rally in nation’s stock market, which marked its second consecutive record-high close on Wednesday.
Equities may see some knee-jerk reactions after a court ordered the $110 billion conglomerate to reinstate the chairman it fired in 2016. But the fight to control the salt-to-software group won’t change how it is run or the outlook for India equities in the long term, market participants said.
Tata Sons Ltd., the holding company for the group, has four weeks to appeal the ruling. The company said in a statement that it “strongly believes in the strength of its case and will take appropriate legal recourse.”
Shares in Tata Consultancy Services Ltd. rose 1 per cent on Thursday morning, while those in Tata Motors Ltd. and Tata Steel Ltd. were little changed. Tata Motors had plunged 3 per cent on Wednesday.
Short-term pain
“There will be some knee-jerk reaction in the group’s stocks for the short term due to uncertainty on leadership, but this won’t affect the fundamentals of the group’s stocks or India in the long term,” said Chokkalingam G, managing director and founder at Equinomics Research & Advisory.
“Even if Mistry comes, the group will continue to improve its business by running the companies efficiently.”
No market risk
“It will not become a risk for the broader market because the large companies of the group are independent and performing well,” said Aneesh Srivastava, chief investment officer at IDBI Federal Life Insurance Co.