Further re-rating of M&M depends on UV, capital allocation outcome

Share price jump reflected in current valuation

The Mahindra & Mahindra (M&M) stock has gained 48 per cent since mid-May, outperforming the BSE Auto Index, which was up 33 per cent during the same period. The outperformance was due to expectations of higher growth for tractors, better-than-expected operating performance in the March quarter, and improving capital allocation policies. 

The immediate trigger for the stock has been volume uptick in the tractor business. For June, the company posted 12 per cent increase in domestic tractor sales. The segment is the only one to have posted growth, compared to a sharp decline in other auto segments. The growth was led