FUNDAMENTAL ANALYSIS:

Indian economy:

GDP growth of 8.9 per cent in Q2 of 2010-11 suggests that domestic momentum
remains strong. Agricultural growth has recovered on the back of a good monsoon.
After flagging during August-September, the index of industrial production (IIP) grew
by over 10 per cent in October 2010. Various indicators of industrial activity,
including the Purchasing Managers’ Index (PMI) also suggest a strong underlying
momentum. Lead indicators of services sector activity have continued to increase at
a robust pace. These developments reinforce the Reserve Bank’s projection of 8.5
per cent for real GDP growth for 2010-11.

After remaining in double digits for five successive months, year-on-year headline
WPI inflation declined to 8.8 per cent in August 2010 and further to 7.5 per cent in
November 2010. Consumer price (CPI) inflation for industrial workers and
rural/agricultural labourers softened to single digit rates from August 2010, after
remaining in double-digits for over a year. The overall reduction in inflation reflects
moderation of food price inflation following a favourable monsoon. Food price
inflation moderated from an average of 15.7 per cent in Q1 of 2010-11 to 12.3 per
cent in Q2, to 10.0 per cent in October 2010 and further to 6.1 per cent in
November 2010. Amongst food items, the moderation in inflation for cereals and
pulses has been larger than that in inflation of protein related food items such as
egg, fish, meat and milk reflecting the structural nature of food inflation. In addition,
inflation for non-food primary articles such as raw cotton, raw rubber and minerals
rose sharply. Reversing the declining trend in the last six months, non-food
manufactured products inflation edged up to 5.4 per cent in November 2010.

With the above promising economy, the Indian Auto sector can be expected to have
a good growth.

Indian Auto Industry:

Automobile sector is very happening sector in India. Even the rising fuel price
constraints are not enough for auto companies to slow down.
Cut throat competition among top companies, lots of new car and vehicle model
launches at regular intervals keeps the Indian auto sector moving. Industry veterans
have opined on recent fuel price hike that it could affect only for very short frame of
time. It won't affect in long term.

The reason behind this optimism is that auto sector is likely to remain buoyant in FY
2011 with strong volume growth and better than present margins for auto stocks.
Conservative projection for automobile sales volume growth is of 13 - 14% and the
actual expectation for FY 2011 is of ~20% volume growth in car segment. Same
growth is expected in two wheelers. And check this, heavy trucks segment volume
is expected to grow at astonishing 25%. This view is being expressed with inputs
from vehicle dealers, vehicle financiers, truck operators, auto component suppliers
and such entities. Vehicle dealers have confirmed the demand for vehicles continue
to remain strong and that their inventory levels are very low. They don't need to
stock up the vehicles for long and that the demand is buoyant.

On the other hands, commodity prices are loosing it's shine. With commodity (steel
and other metals) prices dropping, automobile sector stocks would benefit by
reduced input costs.

Based on all these inputs, bullish trends are being predicted for auto market.
Earnings for FY 2011 are expected to increase by 1 -12% and again at 0 - 10% in FY
2012. Since earnings prospects are looking bright, automobile sector stocks may
appreciate by up to 5 - 15%.

Company analysis:

The Gross Revenues and Other Income of Mahindra & Mahindra Ltd. for the quarter
ended 30th September 2010 is Rs.6157.3 crores as against Rs.5156.8 crores during
the corresponding period last year – a growth of 19.4%. The Profit before tax for the
quarter is Rs.1006.8 crores as against Rs.862.5 crores in Q2 last year – a growth of
16.7%. There are no exceptional items during the current quarter; however during
Q2 last year there was an exceptional profit before tax of Rs.90.8 crores arising
from the Mahindra Holidays IPO. After considering exceptional items and providing
for tax, the net profit for the current quarter is Rs 758.5 crores as against Rs 702.9
crores in Q2 Last year. Excluding the impact of exceptional/ special items, profit

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after tax during the quarter was Rs 775.8 crores as against Rs 634.2 crores in Q2
last year – a Growth of 22.3%. The good financial results of the company despite the
relentless increase in material costs is due to a good volume performance by both
Vehicles and Tractors, tight control on expenses and prudent financial management
resulting in lower interest costs.

In the Utility Vehicle segment, the company sold 56,639 vehicles in the current
quarter and retained its dominant position with a market share of 62.2%. All
products in the company’s UV portfolio did well. In the small 4W load carriage
segment, sales of the recently introduced Maxximo continued to grow and it
notched up a market share a 16.9% in the quarter. The company’s three wheeler
and mini four wheeler sales grew by 52% which was well above industry average.
The overall market share of the company in this segment was 12.1%. The current
quarter also saw the company exporting 3835 vehicles as against 1862 vehicles
exported in Q2 last year - a growth of 106%. SAARC, South Africa & South America
mainly contributed to this healthy growth.

The domestic tractor industry sales during the quarter grew by 10.6% to 102833
tractors against 92991 tractors sold in Q2 last year. The company’s domestic tractor
sales under Mahindra and Swaraj brands were 42473 nos. during the quarter
against 38811 nos. sold in Q2 last year. The company’s total market share during
the quarter stood at an impressive 41.1%.

Keeping in view of the Indian economy, Indian automobile industry and the
Company’s performance, M&M is posing a promising future with its growth
expected as 15%.

Quote on closing of 23 Dec 10:

Last Price

Today's Change
Open
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52-Week Range

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TECHNICAL ANALYSIS:

PRICE TREND

5 YEAR

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3 MONTH

Looking at the price trend, the trend in bullish and is growing. Traditionally, at the
end of Dec and towards the starting of the year, it can seen from the 5 year trend,
the market always moves in downward trend. This is due to the fact that the sales
in month of Jan to Mar will always be down and will peak for a short span of time
during March.

INFERENCE FROM THE FUNDAMENTAL AND TECHNICAL ANALYSIS

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Eventhough the fundamental analysis provides a growing trend, technical analysis
provides a down trend. It can be inferred that fundamentally M&M is strong and as a
long term investment can be made in M&M’s share at the present price of Rs. 760
to 762.

As the short term investment is not good as the price tend to drop, it is adviced to
sell the shares at the prevailing price and buy back them at a later date when the
prices comes to Rs 725 which happened previously on 16th Dec 2010. It can be
predicted that this price level will be reached again during end of Feb 2011.

REFERENCES:

www.mahindra.com

www.rbi.org

www.economictimes.indiatimes.com

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