ITC Shares Break ₹500 Barrier on Stable Tobacco Taxes and Jefferies Upgrade

ITC shares broke the ₹500 barrier for the first time on Wednesday, July 24, driven by the announcement of the Union Budget 2024. The stock’s momentum was bolstered by Jefferies upgrading its rating to “buy” following Finance Minister Nirmala Sitharaman’s decision to keep tobacco taxes unchanged. This decision came after a significant 16% hike in the National Calamity Contingent Duty (NCCD) last year. Jefferies set a target price of ₹585 for ITC, suggesting a potential upside of 15.5%.

Strong Market Performance

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 gained 10.5%, with a 4.4% increase in the last month alone. Notably, 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. The stable tobacco taxation has positioned ITC as one of the top performers on the Nifty 50 and Sensex indices.

Jefferies’ Positive Outlook

Jefferies’ upgrade to a “buy” rating was influenced by the unchanged tobacco taxes and likely stable GST rates until March 2026. The brokerage house commented that “no news is great news” for ITC, emphasizing the positive impact of the Finance Minister’s decision. The unchanged tax rates provide a favorable environment for ITC’s tobacco business, which is a significant revenue driver for the company.

Boost in Rural Demand and Non-Tobacco Businesses

The demand outlook for the staple sector is improving, with an expected revival in rural demand anticipated to benefit ITC’s non-tobacco businesses, including FMCG and agriculture. The Finance Minister increased the Union Budget’s rural allocation by 12%, supporting this positive outlook. This boost in rural development spending is expected to drive demand for ITC’s products in rural markets, enhancing the company’s overall growth prospects.

Impact of Higher Standard Deductions

The Finance Minister’s announcement of higher tax rates under the New Tax Regime, alongside increased standard deductions from ₹50,000 to ₹75,000, will result in net tax savings of approximately ₹17,500 for individuals. This is expected to benefit corporations in the FMCG sector, including HUL, Dabur, and Nestle, alongside ITC. The increased disposable income for consumers is likely to drive higher spending on FMCG products, contributing to the growth of companies in this sector.

In Conclusion, The Union Budget 2024 has brought significant positive news for ITC, with stable tobacco taxes and increased rural spending expected to drive growth. Jefferies’ upgrade to a “buy” rating and a target price of ₹585 highlight the stock's potential upside. As ITC continues to benefit from favorable government policies and improved rural demand, it remains a strong performer in the Indian stock market.

Disclaimer:The views and recommendations expressed above are those of individual analysts, experts, and broking companies, not of FinBrook. Investors are advised to consult with certified experts before making any investment decisions.