Sales in Gujarat were up by over 50 per cent during the month.
July was one of the worst months, with volumes dropping about 13 per cent. Anish Rankawat of Nirmal Bang Institutional Equities believes the lower volumes were on account of a delay in monsoon, lower construction projects in the eastern region, inventory correction by dealers, and lack of participation by players in tractor subsidies.
If the trend of improvement in volumes continues, analysts expect the industry growth guidance to be revised upwards. After its June quarter results, M&M had revised its sector guidance downwards.
The company indicated that the sector would sell the same number of tractors in FY20 as it did in FY19, while its earlier prediction was for 5 per cent growth. In addition to a weak monsoon, the company had cited lower government spending, falling rural wages in the non-agricultural segment, lower crop prices, and weak rural spending for the weak show in the first four months of the financial year.
The two major listed entities that will benefit the most on account of improving volumes are M&M and Escorts.
Over the past year, the stocks had lost 44-50 per cent each.
Analysts at Emkay prefer M&M, given that the company continues to gain market share on the back of a favourable base and higher marketing initiatives. They also said that M&M’s dealer inventory was lower by 10-15 days, as compared to its peers.