Shares of Mahindra & Mahindra (M&M) and Escorts gained 3 per cent on the BSE on Wednesday in an otherwise subdued market as the tractor segment extended the trend of outperformance vis-a-vis rest of the automotive space in November 2020.

The stock of M&M hit a 52-week high of Rs 758, surpassing its previous high of Rs 745, touched on November 24, 2020. Escorts hit an intra-day high of Rs 1,419, and was trading close to its record high of Rs 1,446 touched on November 19, 2020.

In November 2020, total volumes at M&M and Escorts rose 56 per cent year-on-year (YoY) to 32,726 units and by 33 per cent YoY to 10,165 units, respectively.

Escorts have taken a price increase this month to pass on the inflation in the commodity prices. The company said the dealer and depot stocks continue to be lower. Stock correction in the coming months would continue to push the industry upwards, supported by healthy water reservoir levels and a good harvest. The supply chain still is volatile but should improve going forward, it said.

M&M said the rural sentiments remain positive on account of higher Kharif output and Rabi sowing. Procurement operations for Kharif are in full swing which would keep the rural cash flows healthy. The government’s focus on rural growth continues and outlay under Atmanirbhar Bharat 3.0 will provide further fillip to the industry, it said.

“Positive rural sentiment and cash flows on the back of strong Kharif production and encouraging Rabi sowing along with continued government support (remunerative MSPs, infra spends) remain meaningful tractor industry tailwinds. Both our coverage universe players are already up in single digits YoY on a YTD basis, with double-digit growth expected for FY21E”, ICICI Securities said in a note.