Budget Impact: ITC Shares Surge Past ₹500 on Unchanged Tobacco Taxes and Jefferies Upgrade

Shares of ITC surged nearly 4% to breach the ₹500 mark for the first time on Wednesday, July 24, 2024. This milestone follows a significant rally driven by the Union Budget 2024, where Finance Minister Nirmala Sitharaman announced no changes to tobacco taxation.

Jefferies Upgrade and Stock Performance

The momentum in ITC's stock was further bolstered by a positive rating from brokerage firm Jefferies, which upgraded the stock to a "buy" with a target price of ₹585, indicating a potential upside of 15.5%. During intra-day trading, ITC shares climbed as much as 3.7% to reach a new high of ₹510.60.

Over the past year, ITC has seen a gain of 10.5%, with a notable 4.4% increase in the last month alone. Remarkably, the stock has surged over 19% in July and has risen nearly 28% from its 52-week low of ₹399.30 on March 12, 2024.

Stability in Tobacco Taxes

The Finance Minister's decision to keep tobacco taxation unchanged comes after a significant 16% hike in the National Calamity Contingent Duty (NCCD) last year. This stability has positioned ITC as a top performer on benchmark indices Nifty 50 and Sensex. Jefferies remarked, "no news is great news" for ITC, emphasizing that the unchanged tobacco taxes and likely stable GST rates until March 2026 are significant positives for the company.

Positive Outlook for Non-Tobacco Businesses

In addition to the favorable tax environment, the demand outlook for the staple sector is improving. An expected revival in rural demand is anticipated to benefit ITC’s non-tobacco businesses, such as FMCG and agriculture. The Finance Minister's announcement of a 12% increase in the Union Budget’s rural allocation further supports this positive outlook.

Broader Market Impact

Experts also highlighted the broader impact of the budget on the FMCG sector. The Finance Minister's announcement of higher tax rates under the New Tax Regime, alongside increased standard deductions from ₹50,000 to ₹75,000, is expected to result in net tax savings of approximately ₹17,500 for individuals. This, in turn, is likely to benefit corporations in the FMCG sector, including HUL, Dabur, and Nestle, alongside ITC.

Conclusion

The Union Budget 2024 has brought a wave of positive news for ITC and the broader FMCG sector. With unchanged tobacco taxes and a favorable rural demand outlook, ITC shares have surged past the ₹500 mark, reflecting investor optimism. The Jefferies upgrade to "buy" further underscores the potential for continued growth in ITC's stock. As the market digests these changes, ITC and other FMCG stocks are poised to benefit from the stability and growth opportunities presented by the budget.

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