Shares of ITC on Thursday extended their gains for the third straight session ahead of the December quarter (Q3) results. The stock settled 4.74 per cent higher at Rs 378.60 over its previous close of Rs 361.45. The scrip has jumped 9.85 per cent in three straight sessions. The country’s biggest cigarette maker would announce its Q3 results tomorrow.
JM Financial Institutional Securities has assigned a ‘Buy’ call on the stock with a target price of Rs 440.
“More than the fact that Budget 2023 imposed a total tax hike of just about 2.5 per cent (as per our workings) on the legal cigarettes industry, we are encouraged by the fact that it is now quite evident that the government is able to better appreciate the legal industry’s logic that a punitive taxation regime on legal cigarettes alone does not necessarily help control the use of tobacco in the country, but instead causes migration out of tax-paid cigarettes into illegal channels,” the brokerage stated.
Some brokerages largely believed that consumers may accept a moderate hike in the cigarette tax. Nuvama Institutional Equities said it expects a decent probability of some hike in taxes on cigarettes as the last hike was made three years ago.
Finance Minister Nirmala Sitharaman has proposed to hike calamity duty on cigarettes and tobacco products by 16 per cent in Budget 2023.
Technical charts suggested that support on the counter could be seen at Rs 345, followed by Rs 350 level, an analyst said.
Osho Krishan, Senior Analyst – Technical and Derivative Research at Angel One, said, “ITC witnessed an extravagant move of nearly 10 per cent in the week, leading it to a fresh lifetime high. On the technical chart, the counter has witnessed a fresh breakout from the levels of Rs 360 on the back of robust volumes, implying inherent strength. However, post the recent vertical move, one should not rule out the possibility of cool-off or profit booking. As far as levels are concerned, Rs 360 is likely to cushion any short-term blip, followed by a strong support of Rs 345-350 odd zone. On the higher end, the stock is well-versed to continue its northward march, but one should not be very complacent with the move and should utilize declines to add positions in the counter.”
AR Ramachandran from Tips2trade said, “Rs 383 is a very strong resistance now for ITC on the daily charts. Investors should book profits at current levels as stock is overbought.”
The stock traded higher than 5-day, 20-, 50-, 100- and 200-day moving averages. The counter’s 14-day relative strength index (RSI) came at 82.42. A level below 30 is defined as oversold while a value above 70 is considered overbought. The company’s stock has a price-to-equity (P/E) ratio of 26.42.
ITC has an average target price of Rs 373.92, Trendlyne data showed, suggesting a potential downside of 1.24 per cent. The scrip has a one-year beta of 0.6, indicating low volatility.
Meanwhile, Indian equity benchmarks ended on a mixed note today. The benchmark BSE Sensex pack rose 238 points or 0.38 per cent to close at 59,932, while the broader NSE Nifty index edged 6 points or 0.03 per cent to finish at 17,610. Nifty constitutes two Adani Group heavyweights (Adani Enterprises and Adani Ports).
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