For January, tractors provided the surprise, driving Mahindra & Mahindra's sales, whereas the rest of the company's sales volume was marginally below our

expectation. M&M also led the pack in terms of yoy (20%) and mom (12%) growth. M&M remains our top pick in sector, followed by Hero Honda and Tata Motors.

􀀟 In terms of yoy growth, Mahindra and Hero Honda led the pack with 19.7% growth, closely followed by Tata Motors (15.2%) and Maruti Suzuki (14.7%). In terms of mom growth, except for Hero Honda (-7%), the rest all clocked growth of 10-12%.

􀀟 In an environment of rising petrol prices, lending rates, our Buys in the sector are Mahindra, Hero Honda, Tata Motor and Ashok Leyland in that order. We remain cautious and maintain a Hold rating on Maruti and Sell on Bajaj Auto.

Monthly company sales volume details
􀀟 M&M's January sales volume was impressive - +12% mom, +20% yoy, +25% RBS est. Tractors surprised most as the segment recorded 28.4% mom jump to 19,430 (second best month since April 2010). Automotive sales jumped 5.8% mom on higher base, driven by utility vehicles.

􀀟 Maruti total sales volume was in line (1% below) with estimate, as disappointment in exports (-36% yoy) was overcome by strong domestic sales growth (+23.8% yoy). However mom sharp dip (40%) in domestic retail sales volume to 80,000 concerned us. As a result, we felt dealer inventory levels may have increased back to the normal level of 25 days sales volume.Our channel checks indicated the launch of new models Kizashi and SX4 disel in coming months.

􀀟 Tata Motors sales volume was 2.5% below our estimate as cars continued to drag, whereas domestic CVs and UVs (4%) surprised. Nano continued the mom uptrend. The marginal (3- 4%) mom dip in CV volume from the high December base was not a cause for concern. Export sales are in line.

􀀟 Hero Honda sales volume disappointed by 3% after a strong December. It's the only company among peers to have recorded a mom drop (6.9%), even though its yoy growth led the pack along with Mahindra. Production capacity constraints continue to limit growth.