ITC shares rallied in early trade before paring some gains to close nearly 1% higher at ₹415.75 on Thursday.
With the GST Council approving tax cuts in the majority of FMCG products to 5%, while increasing tax for ‘sin goods’ like tobacco-related products, ITC finds itself in an interesting position as it has a strong presence in both categories.
The GST Council announced on Wednesday that sin goods, including pan masala, cigarettes, gutka, and chewing tobacco, will be taxed at 40%, with the levy applied to retail prices rather than ex-factory prices.
However, the council clarified that tobacco and related products will be the only category to migrate to the new GST 2.0 framework at a later stage.
Additionally, Finance Minister Nirmala Sitharaman said the compensation cess on tobacco products will remain in place until the cess-linked government loans are paid off.
“Pan masala, cigarettes, gutkha, and other tobacco products such as chewing tobacco, products like zarda, unmanufactured tobacco, and beedi will continue at their existing rates of GST and compensation cess, where applicable, until the loan and interest payment obligations under the compensation cess account are completely discharged,” Sitharaman said.
According to an Economic Times report, cigarettes currently add a 28% GST plus a compensation cess. The specific cess varies from ₹2.1 to ₹4.2 per stick depending on length, with an additional ad valorem of 5% (for sticks up to 74 mm) and 36% (for 84 mm).
Analyst Take
The recent GST announcement has provided a clear push for FMCG stocks and weighed heavily on sin goods. However, ITC finds itself in a tricky middle ground, given its strong presence in both segments. This mixed positioning is also reflected in ITC’s weekly chart pattern, according to SEBI-registered analyst Kush Ghodasara.
ITC’s stock appears to be forming a slanting inverted head-and-shoulder pattern, which is not very common. The neckline at ₹427 is acting as a stiff resistance level, Ghodasara noted.
Following the GST announcement, ITC once again tested this resistance but was unable to sustain the move and slipped back. While indicators remain tilted in a positive direction, momentum appears to be lacking at the moment, he added.
ITC: Trading Strategy
He sees two possible trades. In one scenario, traders can buy above ₹427, with targets at ₹495 and a stop loss at ₹405. In the other, a sell setup may unfold if ITC breaks below ₹402, with downside targets at ₹388 and ₹345, keeping a stop loss at ₹426.
What Is The Retail Mood?
Data on Stocktwits shows that retail sentiment turned from ‘bearish’ to ‘neutral’ on this counter.
The stock has fallen around 10% this year so far.
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