In past one month, M&M has underperformed the market by falling 12 per cent as the company’s tractor sales delivered disappointing performance. In comparison, the benchmark index S&P BSE Sensex was up marginally by 0.33 per cent.
In November, M&M’s tractor segment’s volumes declined 19 per cent to 21,032 units, over the same month previous year. Within tractors, domestic volumes declined 19 per cent to 20,414 units, while exports were lower by 22 per cent to 618 units.
Yesterday, the Reserve Bank of India (RBI) cut the real GDP growth forecast for the second half (October-March) H2FY20 to 4.9 per cent to 5.5 per cent from 6.6-7.2 per cent earlier. Consequently, the real GDP growth forecast for FY20 has also been reduced sharply from 6.1 per cent earlier to 5 per cent (down by 240bp since the Feb'19 monetary policy meet).
While the RBI expects past measures such as monetary easing and the government’s policy initiatives to spur domestic demand, weak domestic and external demand conditions have led to a cut in the growth forecast for FY20.
“Overall, an unexpected status quo confirms that the RBI prioritized rising inflation over grim economic growth. Our estimates suggest that inflation will remain close to or above 5 per cent by Mar’20, implying that a rate cut in the next MPC in Feb’20 is highly unlikely. Further, since our projections suggest that inflation will retreat toward 4 per cent only by Q3FY21, there is a good probability of a prolonged pause over the next 3-4 quarters,” Motilal Oswal Securities said in a note.