Shares of Mahindra and Mahindra gained over 2 per cent as CLSA has upgraded the company's stock rating to ‘Buy’ from ‘Outperform’ and hiked its target price to Rs 1,610 from Rs 1,585, a potential upside of 25 per cent from Wednesday’s closing level.

The global brokerage firm said that the company's volume growth is on an uptrend, led by strong demand in tractors and a cyclical recovery in light commercial vehicles. Besides, the SUV business has been a drag but even its volumes are recovering on a low base, it said.

The volumes and earnings per share are likely to grow at a compounded annual growth rate of 11 per cent and 13 per cent, respectively over FY17-20, it said.

CLSA said the upcoming Mahindra & Mahindra's multi-purpose vehicle launch due this financial year-end could boost growth for the automaker if designed well and priced right. It also expects a pick-up in the rural economy to benefit the Anand Mahindra-led company.

The stock, the brokerage said, looks attractive after underperforming the Nifty by 13 per cent since June. The company has been in the midst of good news flow, helping the stock rally about 5 per cent in the past three sessions.