Japanese automaker Nissan Motor Co's stock galloped to seven-year high following its buyback news.The company is planning to buyback $3.5 billion worth shares, the biggest exercise for the company so far and first in over four years. 

This news propelled investors and funds to react positively to overcome the ongoing slump in the stock. Nissan shares finally rose 12 percent after witnessing a continuous drop recently. This has been its biggest surge since April 2009.

Bloomberg reports that Japan's second largest automobile major Nissan has decided to buy back shares worth Yen 400 billion ($3.5 billion). It has informed Tokyo Stock Exchange in a filing. Benchmark index Topix rose 0.6 percent in Tokyo. It was noted that Nissan shares fell about 24 percent this year so far before the announcement of shares buyback.

Company's Chairman Carlos Ghosn and other directors have taken a serious note on the plunging of shares. Nissan's stock was underperforming when compared to market competitors such as Toyota Motor Corp. Nonetheless, it has recorded an encouraging performance for the US market.

Nissan announced buyback plan after the markets closed on Friday.According to its communiqué to Tokyo Stock Exchange, it will acquire $3.5 billion worth of its own shares by the end of 2016. Nissan shares were trading at Yen 1,091.5 on Tokyo Stock Exchange. The buyback process begins from Monday and concludes on 22nd of December 2016. However, the buyback plan will not change any shareholding pattern with Renault, according to Business Times.

Nikkie Lu, an analyst for Bloomberg Intelligence, said "You buy back your shares when you think they are hugely undervalued. The repurchase suggests Nissan doesn't foresee a global recession. The automotive industry is cyclical, but it's not as bad as people think."

Renault and Nissan, both automobile majors from Japan and France, have been doing business together from the days of 1990s. Apparently, the ongoing concerns about the global economy growth had been hammering down shares of Nissan. Its shares fell 24 percent this year until the announcement of shares buyback, which has lifted the stock upwards. Renault-Nissan is known as the world's fourth largest car manufacturer with 8.53 million unit sales in 2015.

Considering the Renault-Nissan group's strong position in cash reserves, the company has decided to return the value to shareholders via buyback process. Carlos Ghosn said "Returns to shareholders is one of Nissan's key objectives." Renault holds 43.4 percent shareholding in Nissan. It's noted that the French automobile major will also sell Nissan shares to maintain current shareholding balance. Nissan also holds 15 percent in Renault, as reported by France24.

Nissan has posted increase in earnings following robust sales in the US and China. The surging Yen against the US dollar has impacted Japanese exporters. Yen's strength has shrunk the margins of exporters.