Why have tractor stocks like M&M and Escorts moved closer to their year high levels?

A good agriculture, strong Kharif output and steady rural incomes have led to a strong demand for tractors. That is translating into better returns for tractor shares. Tractor stocks like Mahindra & Mahindra and Escorts have extended their outperformance over the automotive spaces as well as over the market.

In terms of stock prices, M&M hit Rs.758; a 52-week high while Escorts is also tantalizingly close to its yearly high levels. Both the stock have been adequately buoyed by the agri and rural story. For Nov-20, M&M reported 56% volume growth YOY at 32,726 units while Escorts reported 33% volume growth at 10l165 units.

Escorts even managed to hike prices during the month to pass on part of the impact of inflation in commodity prices. Demand for tractors is likely to remain buoyant through the Rabi season due to strong reservoir levels. Both the stock also expect to gain from Kharif output and Rabi sowing which will keep the rural cash registers ringing.