MUMBAI: Though the political unrest over the Nano project appears to be headed for resolution with Trinamool Congress leader Mamata Banerjee suspending her agitation, the stock market remains sceptical over Tata Motors’ near term prospect.

“Solution to the unrest at Singur project could be a sentimental boost. But fundamentally, there is no change to Tata Motor’s situation. The rolling out of Nano during Durga Puja may not add much to the share price as the new car’s profitability is not yet known,” said Manish Sonthalia, vice president – equity strategy, Motilal Oswal.

On Sunday, the Trinamool Congress leader agreed to suspend her agitation at Tata’s Singur plant after West Bengal Chief Minister Buddhadev Bhattacharjee agreed to return part of land within the project area and some from adjacent areas to those farmers who had not opted for compensation package.

“Market has already assumed the shifting of Nano plant elsewhere. Hence, there could be short-lived boost to the share price. But the market will not read much into all these developments as the auto sector as a whole is substantially weak now,” said Manish Innani, director of Prayas Securities.

The automobile sector is likely to see a trend reversal in a year, once inflation moderates and global economy rebounds.

Tata Motors shares Monday closed 4.09 per cent higher at Rs 437.25 on transient sentimental boost following the thaw in talks and surge in broad market which saw the Nifty gain 2.99 per cent to close at 4482.30.

Innani does not expect much upside for the stock in 1-1.5 years.

“Long term investors already invested in the scrip can expect returns over a three-year horizon,” said Motilal’s Sonthalia who does not consider it traders’ scrip.

Analysts are of opinion that Nano can substantially add to the topline of the company once it comes on-stream but bottom-line will not be affected much as they don’t see big profit margins in its sales.

“The depreciation cost of Singur’s plant and machinery will initially eat away the profitability till it is fully written off,” Innani of Prayas said.

Going beyond the Singur debacle, there are other factors weighing on Tata Motor’s share price. The company planned to raise Rs 9,500 crore to fund the acquisition of Jaguar and Land Rover. Scrapping its plan to issue convertible preferential share, the company recently announced a rights share issue in the ratio of 1:6.

“The company faces a challenging time ahead. Raising funds through rights issue will not be easy, especially in the context of declining sales volumes in the auto sector,” said Avinash Gupta, associate vice president, Bonanza Capital.