BENGALURU (Reuters) - Shares of Tata Motors - India's largest carmaker by revenue - fell 5.6% on Wednesday to log their third-worst day this year after UBS said rising discounts could hurt the results of Jaguar Land Rover (JLR), its British luxury car division.

This is the stock's steepest decline in a nine-session losing streak where it has lost 12.8%. It is the top laggard on the benchmark Nifty 50 and Nifty Auto indexes.

"Rising discounts, moderating growth and a lack of any new internal combustion engine and hybrid launch could result in significantly weaker financials (for JLR) for fiscal 2026," UBS said in a note.

The luxury JLR division is Tata Motors' bellwether, accounting for about two-thirds of its revenue. Among JLR's cars, the Range Rover, Range Rover Sport and Defender models are its most margin-boosting variants as they are more expensive.

The brokerage expects discounts for both the Range Rover and Range Rover Sport to rise, with JLR's order backlog below levels last seen before the COVID-19 pandemic.

JLR's wholesales volume in the first quarter grew 5%, its slowest in two years, due to weaker demand in its key European market.

In a bid to capitalise on festive season demand, Tata Motors announced discounts of up to 205,000 rupees ($2,442.28) on its cars in India on Monday.

UBS is one of Tata Motors' biggest bears, with a "sell" rating on the stock and a Street-low price target of 825 rupees, a 15.6% discount to its current price of 977.8 rupees.

The average rating on the stock is "buy" - the same as rivals Maruti Suzuki and Mahindra & Mahindra - while the median price target is 1,200 rupees, per LSEG data.

The stock's decline began when it slid about 1% on Aug. 30 as analysts expected the company's monthly wholesales to have fallen. The slide continued as Tata Motors posted an 8.1% sales decline year-on-year for August.

($1 = 83.9380 Indian rupees)

(Reporting by Varun Hebbalalu in Bengaluru; Editing by Sonia Cheema)