Tata Motors Ltd denied a report on Wednesday that the car maker is in talks to set up an alliance with French peer PSA Peugeot Citroen. "That is absolutely incorrect," Tata spokesman Debasis Ray told Reuters. Germany's Manager Magazin had reported earlier on Wednesday that Peugeot Chief Executive Philippe Varin is looking for an alternative should cooperation with General Motors and its European Opel division collapse, citing unnamed company sources.

"We are still not commenting on the countless rumours about the group," a Peugeot spokesman said.

GM and Peugeot have halted talks on a deeper tie-up amid misgivings about the French carmaker's worsening finances and government-backed bailout, Reuters reported on Tuesday, citing people familiar with the matter.

Peugeot shares rose as much as 3.3 percent on the Manager Magazin report, before giving up most of their gains after Tata's denial. The stock was trading at 4.47 euros as of 1109 GMT, little changed from Tuesday's close.