M&M hits lowest level since April 2010, stock tanks 51% in a month

Shares of Mahindra & Mahindra hit an over nine-year low of Rs 248, sliding 8 per cent on the BSE on Wednesday, on concerns that volumes could take a hit due to the spread of the coronavirus (Covid-19). On Tuesday, Prime Minister Narendra Modi imposed a nationwide 21-day lockdown in an attempt to stall the spread of the virus.

The stock of the automobile company was trading lower for the sixth straight day, and was trading at its lowest level since April 19, 2010. In the past one month, it has tanked 51 per cent, as compared to a 34 per cent decline in the S&P BSE Sensex and a 37 per cent fall in the S&P BSE Auto index.

On Sunday, March 22, the company decided to suspend the manufacturing operations at Nagpur, Chakan (Pune), and Kandivali (Mumbai) plants with immediate effect from Monday night onwards in light of heightened concern on the spread of Covid-19 in the state of Maharashtra.

Covid-19, analysts say, will have an immediate short-term adverse impact on the automobile industry due to a decline in incomes and a slowdown in commercial activity.

“The virus fear is a real risk to demand and could mean a meaningful volume hit if the spread widens in local markets. Our back of the envelope calculations suggest that if Q1F21 were to be a wash-out due to lower retail traffic / push back in discretionary spend and recovery is more gradual going into 2H F21, it could mean a 10-15 per cent earnings cut on a full-year basis for auto OEMs (original equipment manufacturers),” analysts at JP Morgan said in a sector report.

At 10:00 am, M&M was trading 7 per cent lower at Rs 249 on the BSE, as compared to a 0.24 per cent decline in the S&P BSE Sensex. The counter has seen thin volume with about 1.7 million shares changing hands on the NSE and BSE till the time of writing of this report.