Tata group tech stocks surge as JPMorgan upgrade sparks renewed investor confidence
Shares of Tata Elxsi and Tata Technologies witnessed a sharp rally on January 7 after global brokerage JPMorgan upgraded both stocks, signalling a potential turnaround in the automotive engineering and R&D (ER&D) cycle.
Tata Elxsi jumped as much as 10 percent during intraday trade, while Tata Technologies gained over 5 percent, as investors reacted positively to improving demand visibility and higher price targets. The rally came despite broader market weakness, highlighting stock-specific optimism driven by brokerage action.
Upgrade reflects improving ER&D demand and easing global uncertainties
JPMorgan upgraded both Tata group companies to “Neutral” from “Underweight”, citing a recovery in automotive ER&D spending as trade-related tariff uncertainties ease globally. According to the brokerage, automaker clients are resuming paused R&D programs, particularly after recent trade deals provided better cost visibility.
“Work on projects won in 2025 is expected to ramp up this year, with Europe and APAC clients leading the recovery,” JPMorgan noted in its report. The brokerage added that demand conditions in auto ER&D have improved meaningfully over the past three months.
Key themes driving the upgrade include:
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Resumption of delayed automotive R&D programs
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Better demand traction from European and Asia-Pacific clients
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Gradual revival in electric vehicle (EV) investments over the medium term
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Auto engineering focus shifts to hybrids as EV recovery remains gradual
JPMorgan highlighted that near-term auto investments remain focused on hybrid vehicles, while EV-related programs are expected to recover gradually. This shift is supporting near-term revenue visibility for ER&D-focused IT firms like Tata Elxsi and Tata Technologies.
“Auto investments are currently skewed toward hybrids, with EVs likely to see a stronger recovery in the medium term,” the brokerage said. This balanced mix of demand is seen as positive for companies with diversified automotive engineering capabilities.
Price targets raised by up to 25% on demand recovery optimism
Reflecting improving fundamentals, JPMorgan raised its price targets sharply:
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Tata Technologies target raised to ₹710 from ₹570
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Tata Elxsi target increased to ₹4,800 from ₹4,000
These revisions represent a 20–25 percent upgrade in valuation assumptions, driven by better revenue visibility and margin expectations. The brokerage also upgraded Tata Elxsi’s revenue estimates for FY26–FY28 by 1–4 percent and margin estimates by 10–100 basis points, resulting in EPS upgrades of 1–8 percent.
KPIT Technologies remains top pick despite Tata stock upgrades
While upgrading Tata Elxsi and Tata Technologies, JPMorgan maintained its strong conviction on KPIT Technologies, reiterating an “Overweight” rating with a target price of ₹1,400. KPIT shares were trading over 5 percent higher on January 7, reflecting broader optimism in the auto engineering space.
The brokerage stated that KPIT continues to offer superior exposure to auto ER&D themes, even as peers benefit from cyclical recovery.
Tata Elxsi, Tata Technologies rebound after prolonged underperformance
The sharp rally comes after a prolonged period of underperformance. In 2025:
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Tata Technologies fell nearly 28 percent
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Tata Elxsi declined around 23 percent
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KPIT Technologies dropped about 20 percent
This compared with a 13 percent decline in the Nifty IT index during the same period. JPMorgan noted that valuation de-rating on demand concerns had already priced in a pessimistic scenario, leaving room for upside as conditions stabilise.
At around 2:50 pm on January 7, Tata Elxsi was trading close to ₹5,876, while Tata Technologies hovered near ₹683.7, reflecting strong intraday momentum.
Nifty IT outperforms market as mid-cap IT stocks lead gains
The rally in Tata group stocks helped lift the Nifty IT index, which emerged as the top sectoral gainer on January 7 despite broader indices trading in the red. The IT index was up around 1.7 percent in afternoon trade, led by mid-cap names such as Persistent Systems, OFSS and Coforge.
The sectoral outperformance suggests investors are selectively rotating into IT stocks with improving earnings visibility, particularly those exposed to engineering and digital transformation themes.
What this means for traders and long-term investors
From a market perspective, the JPMorgan upgrade has improved near-term sentiment toward auto ER&D-focused IT stocks. For short-term traders, the sharp rally indicates:
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Momentum-driven buying following a brokerage trigger
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Potential follow-through if volumes remain strong
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Resistance near previous breakdown levels to watch closely
For long-term investors, the upgrade highlights a possible cyclical bottoming-out in ER&D demand. However, analysts caution that sustained performance will depend on execution and consistency in client spending.
As one market expert put it, “Brokerage upgrades can change sentiment quickly, but long-term returns will depend on whether demand recovery translates into earnings growth over the next few quarters.”
Outlook: cautious optimism as ER&D cycle shows early recovery signs
Looking ahead, investors will closely track quarterly commentary from Tata Elxsi and Tata Technologies for confirmation of demand revival. If Europe-led ER&D spending sustains and margins improve as expected, the recent rally could mark the beginning of a broader re-rating phase.
For now, JPMorgan’s upgrade has provided a much-needed confidence boost to beaten-down IT engineering stocks, reshaping near-term market expectations and prompting investors to reassess their portfolio exposure to the sector.
