Whalesbook
ITC Stock Gains Momentum on Heavy Volume
ITC's stock climbed for the third straight session on Wednesday, April 29, 2026, reaching ₹317 with a 4% gain. Trading volumes surged to around 21 million shares on the NSE, far above the previous day's 13 million. This move lifted ITC's market value to about ₹3.97 trillion. The broader Nifty FMCG index also rose 2.2%, showing sector support. Technical analyst Rajesh Bhosale noted a positive signal above the ₹310 level, near the 50-day Exponential Moving Average, suggesting potential upside to ₹330-₹340, with ₹300 as strong support.
Valuation and Past Performance Issues
Even with the recent rise, ITC's valuation is viewed differently across reports. Its P/E ratios are cited variously from 10.79 to 15.78, which is just below the FMCG industry average of 16.26. This contrasts with higher P/E ratios for peers like Hindustan Unilever (19.0), Dabur India (36.6), and Nestle India (77.8) in April 2026. These figures may reflect concerns about ITC's growth and regulatory issues. Historically, ITC has underperformed. Its shares are down 13% year-to-date in 2026, worse than the Nifty's 7% drop. Over the last year, ITC fell 26% while the Nifty was flat. It has also posted negative returns over two and three years, compared to positive Nifty gains.
Tax Hikes and Industry Challenges
The current stock rise comes as ITC's main cigarette business faces new tax rules. Since early 2026, the company saw price swings after the government's February 1 tax changes, adding a 40% Goods and Services Tax (GST) and specific excise duties on tobacco. This tax increase followed a stable tax period and led to higher prices and analyst downgrades. Past tax hikes have caused stock drops; for example, cigarette volumes fell over 15% in FY15-16 after mid-teen price increases due to taxes. Beyond tobacco, the wider Indian FMCG sector faces challenges. Lower inflation and stable commodity prices are good, but a potential weak monsoon due to El Niño, along with rising costs for packaging and certain raw materials, could hurt profits and sales.
Key Risks: Regulation and Diversification
Despite the recent stock rise, ITC's core cigarette business is pressured by heavy dependence on it for over 40% of revenue and profits. This concentration means recurring tax risks, as seen with the latest increases. Unlike diversified companies such as Hindustan Unilever, ITC's main segment is closely watched. Analysts are cautious, with some keeping 'Hold' or 'Underweight' ratings because of the tax rules. For instance, Morgan Stanley reportedly rated it 'Underweight' with a ₹290 target, and Jefferies kept 'Hold' at ₹325. The wide range of ITC's P/E ratios (10.79 to 33.8) shows valuation challenges. Some analysts see a potential 'Value Trap' due to past underperformance and tax risks. Also, a large part of cigarette income comes from high-margin premium products, which could push price-sensitive customers to cheaper options or the illegal market after price hikes.
Analyst Views and Future Outlook
It's uncertain how long ITC's current stock rally will last. Analyst price targets show different views. Some targets are around ₹330-₹340, others higher. A survey of 32 analysts shows an average 12-month target of ₹359.06, with a high of ₹486 and a low of ₹290, suggesting a potential 10-18% increase. However, many analysts recommend 'Hold' or 'Neutral' ratings due to ongoing uncertainty. Upcoming financial results will be key to understanding the tax changes' immediate impact and the company's plans.