Mahindra, Eicher Motors, Escorts shares beat index since IMD's monsoon forecast

Key highlights:

• IMD forecast predicted normal rainfall for the country during the June-September
• Shares of Mahindra, Eicher Motors and Escorts rise
• Tractor shares gain more than the index since IMD forecast

Shares of Mahindra & Mahindra (M&M), Eicher Motors and Escorts have gained more than the index since the IMD made the first monsoon prediction two months ago.

Looking at the indices, from April 18, or since the first announcement of monsoon prediction by IMD, Sensex and Nifty has touched all-time highs on many days.

The Indian Meteorological Department (IMD) and private forecaster Skymet have predicted a normal and well-distributed monsoon, that is, rainfall is expected at 96% ± 5% of the Long Period Average.

ALSO READ: Monsoon seen normal this year, IMD says; bonds cut losses

Nifty, which was trading at 9105.15 points on April 18, today closed at 9647.25 points. In less than two months, the benchmark gave returns of 6%. While, Sensex, which was trading at 29319.1 points on April 18, today closed at 31213.36 points. 

Eicher Motors, in this time, rose 16%. On April 18, the shares of the company were trading at Rs 25566.2 per piece. Today it closed at Rs 29613.80 per piece, giving return of 15.8%.

The shares of Escorts gave over six time returns than Sensex. On April 18, shares were trading at Rs 540.75 per piece. Today, it closed at Rs 748.9 per piece, giving returns of 38.4%.

ALSO READ: Tractor sales plough through demonetisation in January; higher growth expected ahead

Mahindra & Mahindra (M&M) gave double the returns than that of Sensex. On April 18 shares of the company were trading at Rs 1262.75 per piece. Today, it closed at Rs 1417.85 per piece, giving returns of 12.2%.

Clearly, all the three listed tractor companies, gave way more returns than the indices, showing optimistic views on monsoon.

ICRA said that a pick-up in the rural economy owing to a normal monsoon and government support would be positive for retail loan asset classes like tractor and microfinance loans.

ALSO READ: Domestic tractor manufacturers to register 16 to 18% sales growth in FY17: Crisil

M&M, which is one of the largest tractor manufacturers in India, has see a growth in sales of 70% since the previous monsoon season as rainfall had been above average.

 "With road transport being a major means of transporting agricultural produce from the farms to the market, commercial vehicle operators are expected to benefit from a normal monsoon. A normal monsoon would result in better freight availability, improve utilisation of the existing fleet, and support freight rates," said Dipanshu Rustagi, a Moody's Assistant Vice President - Analyst.