The stock surged 8%

​By a staff reporter : 

Shares of ITC saw their biggest gain in more than a year, and outperformed the headline indices The stock surged 8% and hit an over six-month high of 233.45 rupees.

The reason behind such a sharp upmove could not be immediately ascertained, but dealers and analysts said that expectations of no changes in tax rates for cigarettes in the upcoming GST Council meeting and improving outlook for recovery in cigarette volumes may have aided the gains.

The GST Council is scheduled to meet on Friday. In its Union Budget for 2021-22 (Apr-Mar), the government had left taxes on cigarettes unchanged, which boosted outlook for sales volumes in the current fiscal.

The status quo on tax rates on sin goods are expected to drive the recovery in volume of cigarettes and also enable established players to gobble up market share from illegal cigarette makers, analysts said.

Apart from this, resumption of offices and travel is further expected to boost cigarette consumption.

The other possible reason for the rise in ITC could be resurfacing news around restructuring of its business. The Street has been for long awaiting demerger of the core fast moving consumer goods business as this would significantly improve valuation. The process may be gaining traction, some dealers said.

The positive outlook for cigarette volumes saw other cigarette players too, gaining. Shares of Godfrey Phillips India, VST Industries, Golden Tobacco, and Raghunath Tobacco Co rose 4-10%.

Source : Eureka