With India’s economy and most other economies around the globe showing signs of improving during the second half of this year, the outlook for Tata Motors (TTM) appears to be very positive.

Tata Motors, which is India’s largest automobile manufacturer, makes a broad range of vehicles, including the world’s most-affordable family car, the Tata Nano; premium luxury cars, such as the Jaguar XJ sedan; and the Land Rover sport-utility vehicle.

The Mumbai-based company is also India’s largest manufacturer of commercial vehicles, with its offerings including tractor-trailers, heavy-duty trucks for the construction and mining industries, and small-, medium- and large-sized buses. In terms of the number of vehicles sold, Tata Motors is the world’s fifth-largest manufacturer of commercial trucks and the world’s fourth-largest manufacturer of buses.

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After growing its net income before income taxes by a mere 6.3% during the company’s fiscal year ended March 31, 2013, on a 13.5% increase in the company’s revenues, Tata Motors performed exceedingly well over the nine months ended Dec. 31, 2013. Specifically, the company grew its net earnings by 69.4% during that period, as compared to the same period a year ago, on a 26.1% increase in its revenues.

Although India’s spending on infrastructure, such as the building of roads, bridges, and public transportation projects, slowed over the past few years, my research indicates that government spending on those types of projects will increase considerably over the next couple of years. Any such development would bode well for Tata Motors, which has, historically, derived more than 39% of its revenues from the sale of commercial vehicles.

Meanwhile, a likely increase in India’s pace of economic growth during the second half of this year would also bode well for Tata Motors, as any such increase would likely be accompanied by similar increases in the trucking industry.

Although trucking freights were relatively unchanged over the past two years, the amount of goods transported by large commercial trucks in India rose by more than 3% per month during each of the past four months. Hence, there’s a good likelihood that the demand for Tata’s commercial trucks will increase through at least the remainder of this year.

Separately, a continuation of the recent economic improvements in the United States, Europe and Japan would likely portend well for Tata’s luxury auto division, with the company’s luxury autos generating much larger profit margins than its other passenger vehicles.

Over the past two years, revenues from Tata’s sales of Jaguar and Land Rover vehicles rose by almost 53%, and some awards won by those vehicles over the past two years suggest that the company’s revenues from those vehicles will continue to rise.

For example, Jaguar and Land Rover received more than 110 awards collectively from leading international motoring writers, magazines and commentators during 2012.

In addition, the Jaguar XF was named “Best Executive Car” by What Car? Magazine for the fourth consecutive year during 2013. Separately, the new aluminum Range Rover, which was launched during September 2012, was declared by The Sunday Times (of London) to be the world’s top SUV and it won Top Gear magazine’s “Luxury Car of the Year” during 2012.

After breaking out to a new all-time high on April 4, TTM traded in a narrow sideways pattern through the first week of May but then broke out to another all-time high on May 8, and it continued to trend higher through Friday after pulling back a bit this past Tuesday.

The stock rose $1.07, or 2.7 percent, to close Friday at $40.68 in NYSE trading.

Although price-momentum statistics indicate that TTM is trading currently in overbought territory, and the relatively light trading volume for TTM over the past few days suggest that it will pull back again before moving higher, underlying fundamentals for Tata Motors suggest that its stock is still trading at a bargain price.

For example, my research indicates that Tata Motors will grow its net earnings by an average rate of around 15% over the next 3-5 years, yet the company’s stock closed today at a price-to-earnings multiple of only 11. Therefore, I would advise stock market investors and speculators to allocate a percentage of their financial market assets to TTM at prices below $40.

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David N. Frazier has an extensive background in the investment securities industry and has invested in the financial markets for more than 25 years.

In addition to working as a business analyst, merchant banking analyst and equity research analyst, he’s held positions in sales and marketing at institutional investment firms, including William O’Neil & Co., TDAmeritrade, and Merrill Lynch.

David now serves as the president and chief market strategist of Frazier & Mayer Research, LLC (dba www.TheMarketMonk.com), an independent investment research firm that provides research and analytical services to hedge funds, investment advisory firms, and other investment newsletters.