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  • Category: Finance and Investments

    Can you explain the correction in price of ITC stock?

    Having a query about how the correction is carried out in ITC stock price? Searching for the detailed reasons for this correction? On this Ask Expert page get to know the reasons.

    As an amateur investor, I have been trying to analyse the fundamentals of ITC. The financial position of the Company is very good. The hotel, cigarette and FMCG businesses of the Company have been performing very satisfactorily. The Company doesn't have any major debt. All the necessary financial and business parameters are prima-facie good.

    Even then, the stock has been correcting itself for the last three months or so. Although the correction provides an excellent opportunity for entry in this stock, I am interested to know the reason(s) behind this correction.

    Can any Member explain the reason for correction in the price of ITC stock?
  • Answers

    3 Answers found.
  • The global markets are unsteady with the fed polices, trade war between USA and China, global cues. The Indian markets are also jittery. This would be the general reasons.

    The cigarette business accounts for around 40% of ITC revenue. There had been concerns about the reverse charge mechanism which would lead to liablity of tax payment. This has been deferred and the tax exemption benefit is now being extended for 6 more months.

    There was also the issue with videos showing plastics being found in Aashirvadd atta of ITC, Mr.Mallik ITC divisional chief executive has issued statements to say this is false propaganda and FIRs have been filed. This also would have had an impact.

    There has been a block deal on 21st March 2018 to the value of 10.48 crores. on 19th March another block deal worth Rs 6.53 crores.Similar deals around Rs 5 crores happened on 8th and 12th of March. Such block deals happen when a fundamentally good company's price falls for general market reasons. So, if I was invested, I would stay so, and try to add more in a staggered manner.

  • Due to global business scenario and the downtrend in the economy of a particular sector it is possible that a particular share may see a downtrend but it is generally a temporary phenomenon.

    Though market experts attribute it to some particular reasons but many times it is created by the market manipulators. These players will buy and sell to create a psychological pressure and common people will follow them to create unnecessary panic.

    Apparently ITC is also facing the same ordeal. It is a blue chip share and has a robust and sound consumer base. One must hold it for long term perspective.

    Knowledge is power.

  • The share price of the ITC fell sharply after the clarification on the GST cess on cigarettes. The GST council had fixed 28% as the top rate for cigarettes in May but later in July levied a 5% ad valorem cess and Rs 1,591 per thousand sticks as fixed cess on both filter and non-filter cigarettes of not exceeding 65 mm length. Becuase of this there is a dip in the share value.
    Another reason for the recent losses in the stock is an overreaction in the markets. The brokerage firms advice investors to buy the stock at the current market price and add on dips to Rs 247-251 band.HDFC Securities has rated ITC Ltd's shares as 'buy' with sequential targets of Rs 300 and Rs 322 over the next three-four quarters and is expecting strong growth potential.

    always confident

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