Tata Motors shares rally after protest called off

MUMBAI (Reuters) - Shares in Tata Motors Ltd jumped nearly 7 percent on Monday after farmers who had blocked work at a plant to build the low-cost Nano car called off their protest, raising hopes the car will launch as planned.

Farmers in Singur in West Bengal, who had forced Tata Motors to suspend work last week after several disruptions, said on Sunday they were suspending their protest after the state promised to return some land.

Shares in Tata Motors, India's top vehicle maker, were up 3.5 percent at 434.5 rupees at 0555 GMT in a Mumbai market that was up nearly 4 percent, after having risen as much as 6.7 percent in early trade.

"The shares are getting a boost as it looks like the confusion is beginning to get cleared and a resolution will be arrived at soon," said Ramnath S, a vice president of research at IDFC-SSKI Securities.

"But if this drags on any further, there may be delays."

Chairman Ratan Tata said last week the company was doing everything possible to launch as planned, around October, the peak of the festival season in India.

Existing Tata Motors plants are expected to make up for any shortfall caused by the disruptions to the Singur plant, which was scheduled to have an initial capacity of 250,000 units.

Local media and analysts have suggested Tata Motors has a few hundred or a few thousand Nano cars ready, and that they can make new cars at a plant in the western Pune city or in northern Uttarakhand, which has a capacity of 2 million units.

"They clearly have a way to build the car elsewhere, but moving to an alternate location means they can't start off with 250,000 units of dedicated capacity for Nano," said Ian Fletcher, automotive analyst at research firm Global Insight in London.