Delhi diesel vehicle ban may fuel ‘buy Maruti, sell Mahindra’ bets

ET INTELLIGENCE GROUP: The temporary ban on diesel vehicles above 2,000 cc in Delhi may drive investors away from M&M, and traders may stick to their favourite strategy — ‘buy Maruti Suzuki, sell Mahindra’. Since January, Maruti has returned 39% against M&M’s 4%.

The ban will not have material impact on M&M’s financials as it derived only about 4% sales from the region in the first half of FY16. But the concern is the ban may extend to more states. This overhang may lead to possible derating of the stock.

The ban affects all M&M vehicles except TUV 300 and Quanto, as it does not have petrol variants of its popular models XUV500, Bolero, and Scorpio. FII interest had perked up in the stock due to cheaper valuation, good sales of TUV 300 and the proposed launch of a compact urban SUV.

Given the uncertainty over the fate of diesel vehicles, investors may prefer to stay away from M&M. A good monsoon next year may rekindle investor interest in it.