ITC’s share price dropped more than 2% on January 6, extending a four‑day slide that totals about a 15% loss after the government announced a higher excise duty on cigarettes.
Why the shares are falling
The Parliament approved a bill that raises the excise duty on cigarettes. From February 1, the duty will be between ₹2,050 and ₹8,500 per 1,000 sticks, depending on the length of the cigarette. This adds roughly 22‑28% to the cost of the longer 75‑85 mm cigarettes, which make up about 16% of ITC’s sales.
Impact on the stock
- Shares hit a 52‑week low of ₹337.75 before closing at ₹343.25.
- The market‑cap loss in four days is around ₹82,000 crore.
- ITC still offers a dividend yield of about 4.1% (₹14.35 per share for FY25).
Technical outlook
Analysts say the stock is under strong bearish pressure. Key levels to watch are:
- Support: Around ₹328 – a break below could push the price lower.
- Resistance: ₹388‑₹390 – a close above this may start a recovery.
- Short‑term focus: ₹340 is a critical pivot; staying above ₹360 with normal volumes would signal stabilization.
What experts are saying
Siddharth Maurya (Vibhavangal Anukulakara) notes the stock is trading below major moving averages, with the first support near ₹328 and resistance near ₹390.
Darshan Rathod (Multyfi) points out that the sharp drop created a classic capitulation pattern. He sees the put‑call ratio suggesting that some traders may be over‑positioned for further downside, while smart money is buying puts around ₹330‑₹340 as a safety net.
Drumil Vithlani (Bonanza) warns that the RSI is deep in oversold territory (around 23) but the short‑term average is still neutral, meaning the bearish trend could keep going. He advises investors to stay out of new long positions for now.
Ajit Mishra (Religare Broking) highlights that the stock has broken below the 100‑week moving average and that momentum indicators are turning bearish. He sees immediate support at ₹330‑₹340, with a further fall possible toward ₹300 if that level breaks.
What investors can consider
- Avoid opening fresh long positions until the stock shows clear signs of stabilization.
- Watch for a decisive close above ₹388‑₹390 as a potential trigger for a short‑term bounce.
- Monitor volume patterns; a return to normal trading volumes around ₹340‑₹360 could indicate the worst is over.
Remember, this is perspective, not a prediction. Do your own research and consider your risk tolerance before making any investment decisions.