Strong monsoon augurs well for farm equipment manufacturers
The positive spread of the monsoon across India is something that is cheerful for the street. As an agricultural driven economy, dependence on monsoon would certainly lead the way forward after lockdown and economic revival. The positive developments are already seen from tractor sales numbers.
Recently, India Meteorological Department (IMD) said that the southwest monsoon had covered the entire country by June 26, 2020, which is 12 days prior to the normal date. The monsoon and its normalcy are very much important for Kharif crops while, in the case of Rabi crops, the procurement and price realisations have been very good.
The trend is already seen in the sales numbers of tractor majors such as M&M and Escorts. On Wednesday, Escorts reported 22.8 per cent YoY growth in June sales numbers (domestic). This can be considered as a very strong comeback after lockdown. Meanwhile, M&M reported 12 per cent growth (domestic) sales numbers. Interestingly, even during May 2020, M&M had reported 2 per cent YoY growth. The sector may see a further course of action very soon with more economic activity.
The tractor segment in India also has a few unlisted players such as Tractors and Farm Equipment (TAFE), International Tractors, CNH Industrial (India). Numbers from these players would further give strength to the sentiment for the overall sector.
On Wednesday, both Escorts and M&M, were trading lower by 1 per cent and 2 per cent, respectively.