Shall I Buy M&M Now?
This week Nifty has succeeded to stay above a strong resistance zone which is definitely a great relief for Indian investors and traders. In between of this many brokerage houses has initiated investment call on M&M. So today we will find whether we should invest in M&M or not at this level.
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About The Company
Mahindra and Mahindra was established in 1945. This is one of the largest manufacturers by production in India and the largest manufacturer of tractors in the world. Its major competitors in Indian markets are Maruti Suzuki and TATA Motors
I observed a weird thing about this company that it has only 8-9% loan in its capital structure when we see it a standalone entity. But if we take consolidated figure then almost 50% of capital structure is funded by loans. May be it has nothing to do with fundamentals but I always prefer debt-free company.
As I have already mentioned that existing debt may play a role of obstacle in M&M's growth but rest of the factors in fundamental analysis are fine. It has reported ₹6850.53 crore net profit in FY 2017 which is almost doubled of net profit reported in FY 2016.
P/E ratio of the company is 11.09 compared to the industry P/E 23.36 showing that this stock is available at cheap price. It also gives regular dividend. Last year it has given 1.12% dividend which is quite satisfactory.
But as a thumb rule I always consider to buy a stock only if it is suggesting me to buy from both fundamental and technical point of view. So let's see its technical charts.
This is the weekly chart of M&M and we can clearly see that it has already bounced back from its support level which is around ₹616-₹620. The significant thing is this bounce back is supported by strong volume which is continuously increasing. So definitely it is a buy sign and you can invest. But as per me I won't prefer to buy M&M in this level because a reason.
First, Nifty is inching towards its all time high and elections are coming nearer, so volatility will continue in Indian markets. So I will wait because in investing you should try to invest in right point of time. Though currently this stock is trading near ₹670, I will buy only if I get the level ₹650. Why I am telling this because in that case you will have a healthy risk reward ratio.
So if you want to invest in M&M for a long term then you can buy it definitely, but if you want to enter in right time and right place then wait for ₹640-₹650 level. As I always write that may be you will not see these levels because no one can predict with 100% but still I think market will remain volatile and we should wait to enter in stocks in right time.
That's all for today. Stay happy, stay healthy, Happy Investing.