Why have shares of M&M been rallying so sharply to a new high?

There has been a lot going in favour of M&M in the recent past and that is evident from the fact that the stock of Mahindra & Mahindra hit a 52-week high of Rs 731 on Tuesday 24 November. It was on the back of expectation of a strong business outlook. The stock gained 14% in last one week itself.

Analysts have a positive view on M&M largely on account of a strong recovery in tractors and LCVs recovering in the second half of the current fiscal year. Tractors demand has also got a boost from solid Kharif output and robust demand from the farm sector.

Even the SUV business, analysts admitted had positively surprised the street. For the company, the focus on tightening capital allocation could act as a catalyst for re-rating the stock higher. M&M gained from its 41% market share in the rural equipment market, especially in the COVID months.

The tractors and farm equipment segment continues to strongly outperform the rest of the auto industry. While rest of autos are growing at 12% annually, the tractors and farm equipment are growing at 40%. Lower pandemic spread and improved farm incomes are also seen as responsible for this robust performance of M&M.