Budget impact: ITC shares breach ₹500 for the first time on unchanged tobacco taxes, Jefferies’ upgrades to buy

Budget 2024: Shares of ITC jumped almost 4 percent to breach ₹500 for the first time on Wednesday, July 24, extending gains after a 5.5 percent rally in the previous session.

This momentum was driven by brokerage house Jefferies upgrading the stock to a "buy" after Finance Minister Nirmala Sitharaman announced no changes to tobacco taxation in her budget address on July 23. Jefferies has set a target price of ₹585 for ITC, indicating a potential upside of 15.5 percent.

The stock climbed as much as 3.7 percent during intra-day trading to reach a new high of ₹510.60. Over the past year, ITC has gained 10.5 percent and 4.4 percent in the last month alone. Notably, the stock has surged over 19 percent in July so far and has risen nearly 28 percent from its 52-week low of ₹399.30 on March 12, 2024.

The Finance Minister's decision to keep tobacco taxation unchanged follows a significant 16 percent hike in the National Calamity Contingent Duty (NCCD) last year. This stability has positioned ITC as one of the top performers on benchmark indices, Nifty 50 and Sensex.

Jefferies commented, "no news is great news" for ITC, highlighting that the unchanged tobacco taxes and likely stable GST rates until March 2026 are significant positives for the company.

Additionally, the demand outlook for the staple sector is improving. An expected revival in rural demand is anticipated to benefit ITC’s non-tobacco businesses, such as FMCG and agriculture. The Finance Minister increased the Union Budget’s rural allocation by 12 percent, further supporting this positive outlook.

Experts also pointed out that the Finance Minister's announcement of higher tax rates under the New Tax Regime, alongside increased standard deductions from ₹50,000 to ₹75,000, will result in net tax savings of approximately ₹17,500 for individuals. This is expected to benefit corporations in the FMCG sector, including HUL, Dabur, and Nestle, alongside ITC.

Disclaimer: The views and recommendations above are those of individual analysts, experts and broking companies, not of Mint. We advise investors to check with certified experts before making any investment decision.