Holding M&M in your portfolio? Here's your silver lining!

M&M has very strong support in the zone of 750 -760 and hence it's not expected to fall much lower from the current levels.

How often do you see the stock of M&M slipping by more than 4 per cent especially when Sensex is up by 1 per cent, making fresh life-highs for itself? One might assume that there must be something seriously wrong with the stock to behave in such a manner!

The problem lies in the commentary and guidance given by the management in its latest earnings call. The change in the capital allocation policy may wary several shareholders as it is expected that higher planned capital expenditure than previously estimated may impact the free cash flows in the coming fiscal years. Apart from the increase in the capital budget, the stock lost its positive momentum, owing to management's lukewarm expectations on the tractor sales. The management's estimates put the growth in tractor sales in low single-digit. The supply constraints related to semiconductor shortages and localised lockdown are also expected to weigh on the prospects of the stock in the near term.

M&M has very strong support in the zone of 750 -760 and hence it's not expected to fall much lower from the current levels. The stock is up by approximately 11 per cent on a YTD basis while in one year, it has gained more than 75 per cent.