Tata Motors share price falls over 4% after Q2 results, likely passive selling worth $470 million on index adjustment

Tata Motors share price declined over 4% in early trade on Friday after the company, which now represents the commercial vehicle business, reported its Q2 results. Tata Motors shares declined as much as 4.44% to ₹306.00 apiece on the BSE.

Tata Motors, formerly known as Tata Motors Commercial Vehicles Ltd, reported a consolidated net loss of ₹867 crore for the second quarter of FY26, as against a net profit of ₹498 crore in the corresponding quarter of the previous financial year.

The Tata Group company said that its reported profit was impacted by mark-to-market loss on account of investments in recently listed Tata Capital ( ₹2,000 crore) leading to PBT (bei) of ₹600 crore and net income of ₹900 crore.

The company’s revenue from operations in Q2FY26 grew 6% to ₹18,585 crore from ₹17,535 crore, year-on-year (YoY).

EBITDA margins during the September quarter improved by 150 bps to 12.2%, while the EBIT margin rose by 200 bps to 9.8%, aided by higher volumes and favorable realisations. Free cash flows (FCF) for the quarter stood at ₹2,200 crore.

This was the first quarterly results announced after the Tata Motors demerger took place.

Looking ahead, Tata Motors expects a strong second half for FY26 with the festive season underway, improving consumption, and the full impact of GST reforms yet to unfold.

“Construction, infrastructure, and mining activities will gain momentum, further fueling demand for trucks and tippers,” Tata Motors said.

The business will continue its focus on profitable growth to deliver double digit EBITDA margin and robust cash flows along with high ROCE, it added.

Tata Motors’ Commercial Vehicle arm shares were listed on November 12 after the company’s demerger with its passenger vehicle segment. Tata Motors demerger took effect from October 1, 2025, and the demerger record date was October 14, 2025.

Passive Selling on Index Adjustment

The listing of equity shares of newly carved out entity Tata Motors have triggered some technical adjustment in the key Indian stock market indices. This is likely to prompt significant passive selling from index-tracking funds.

Since Tata Motors has split into two separately listed entities — Passenger Vehicles (PV) and Commercial Vehicles (CV) — index providers such as NSE and BSE will revise the weightage of the stock within indices like the NSE Nifty 50 and BSE Sensex. The CV arm is not being included in the indices; instead, the existing Tata Motors stock will have its weight recalibrated based on the PV business.

According to estimates by Abhilash Pagaria, Head of Alternative & Quantitative Research, the Tata Motors CV shares are expected to face passive outflows worth around $470 million ( ₹4,174 crore) on November 14. This selling pressure comes from passive index funds—ETFs and index-tracking portfolios—that are required to offload the CV shares to realign with the updated index composition.

“The adjustment will take place on November 14th (Friday), and the stock will effectively not be seen in the indices from November 17th (Monday),” Pagaria said.

It is to be noted that such passive flows may temporarily weigh on the stock, but they are purely mechanical and not a reflection of business fundamentals.

Tata Motors Share Price Outlook

Nuvama Institutional Equities raised its FY26–28E EBITDA estimates for Tata Motors by 4% – 7% factoring in lower discounts and higher margin assumption. Post a robust 20% CAGR in Tata Motors’ domestic MHCV volumes over FY21– 25, it forecasts a 1% CAGR over FY25–28E led by reasonable utilisation levels at transporters and higher competitive intensity from Railways.

Nuvama builds in a muted standalone revenue and EBITDA CAGR of 2% and 6% over FY25–28E.

The brokerage firm recommends a ‘Reduce’ call, with Tata Motors share price target of ₹300 from earlier implied target price of ₹280, on 10x Sep-27E EV/EBITDA and investment value at ₹14/share.

At 9:30 AM, Tata Motors share price was trading 3.11% lower at ₹310.30 apiece on the BSE.

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