Britain's referendum vote in June to exit the European Union was a big setback for the steel sale, which Tata has now put on hold.
The Brexit vote has also cast a shadow over Tata Motors' luxury car unit Jaguar Land Rover (JLR), which has a large UK manufacturing base. Tata Motors' quarterly profit halved as the pound slumped following the Brexit vote, and JLR's CEO warned that some customers in Europe, its biggest market, no longer wanted to buy British cars.
Mistry's ouster still took many by surprise, though analysts and investors saw Ratan Tata's appointment as interim chairman as a way to ease concerns. "The impact will be a little softer with Ratan Tata taking over," Gaurang Shah, analyst at Geojit BNP Paribas, told BTVi television.
The board made its decision at a lengthy meeting on Monday, with six of the nine board members backing Mistry's ouster, said one person familiar with the discussions. The person was not authorized to publicly discuss the matter, and did not want to be identified. Two members abstained. Mistry, who could not vote, remains a board director.
Indian news channel CNBC TV18 reported that Mistry's Shapoorji Pallonji family, one of the biggest shareholders in Tata Sons, may legally contest the move. The channel said the Tata Sons board had taken legal advice before making the decision.
"Shapoorji Pallonji could challenge this decision, although I think all the rules were strictly followed and I was convinced," said Mohan Parasaran, a senior Supreme Court advocate who was consulted by the Tata family about a month ago.
Since stepping down as chairman in 2012, Ratan Tata has pursued venture capital investments in ride-hailing firm Ola, e-commerce firm Snapdeal and payment solution provider Paytm.
International revenues make up close to 70 percent of Tata Group's total turnover, and the majority of its capital spending has been overseas in the last three years.
The group's cash cows are Tata Consultancy Services and Tata Motors, together generating half the total annual revenue of $103.5 billion.
Follow CNBC International on Twitter and Facebook.