ITC Stocks Budget 2024: ITC is the only Sensex stock with 90% win rate on Budget days

An analysis of how Sensex stocks have performed in the last 10 Budget days shows that ITC has ended with a positive return nine out of 10 times with an average return of 1.47%.

Since 2016, the worst Budget day for ITC was in 2020 when the stock ended with a loss of around 7% after Nirmala Sitharaman raised excise duty, by way of National Calamity Contingent Duty (NCCD), on cigarettes and other tobacco products.

The next best performer on Budget days is IndusInd Bank, whose shares have not only had a win rate of 80% but have also given an average return of 2.5% on D-Day. Its peer Kotak Mahindra Bank has seen 8 out of 10 Budget days in green while HDFC Bank, TCS, and Nestle have enjoyed a 70% win rate.

Budget expectations

Analysts are not expecting any excise duty or NCCD duty hike on cigarettes in this Budget since price hikes were already taken in the last Budget and any increase in taxes will promote illegal consumption of tobacco. Taxes on cigarettes in India are 14x of US, 7x of Japan, and 6x of Germany.A modest tax hike like last year or no change could be viewed positively by the market. The taxation regime of late has been stable aiding both volume growth for the legal cigarette industry and tax collections, BofA said.Prabhudas Lilladher has increased weight behind ITC by 50bps saying that it expects benign cigarette taxation environment to prevail, which will provide upside in the stock after a long

consolidation. A revival in FMCG and paperboard profitability from the second half of the year and hotel demerger will also unlock value in the stock.

Motilal Oswal estimates that the company can achieve low to mid-single-digit cigarette volume growth with mid to high single-digit EBIT growth in the medium term.

“ITC’s cigarette business has seen volume recovery in FY23 and FY24, with cigarette volume almost at par with its peak volumes in FY13. Stability in taxes and various government initiatives to curb illegal cigarettes have been supporting the legal cigarette market. ITC has done various product innovations in the last 2-3 years to consolidate its market share,” Motilal said.

ITC shares ended Monday’s session 1.7% lower at Rs 466.30 on BSE and are flat on a year-to-date basis.

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