Investor sentiment in consumer staples is poised to perk up further, with bullish recommendations coming for ITC from Jefferies and Morgan Stanley, with significantly higher price targets after the Union Budget gave a major push to consumption through income tax reliefs announced on February 1.
Jefferies has maintained a Buy on ITC with a target price of Rs 550 per share. The brokerage sees ITC as a key beneficiary after the government left tobacco taxes unchanged in the budget. Additionally, GST rates are expected to remain stable until March 2026, providing further clarity.
While demand conditions remain slightly challenging, the stable taxation environment enhances earnings visibility for FMCG players, said Jefferies. The personal income tax rate cuts are also expected to boost consumption, with ITC being a natural beneficiary.
Morgan Stanley has reiterated its Overweight stance on ITC, with a target price of Rs 554 per share. The budget has eased concerns about potential tobacco tax hikes, which is often seen as a key risk factor. With strong business fundamentals, ITC is well-positioned for sustainable growth.
Veteran market investor Samir Arora said it was a 'dream Budget' and 'one of the best' in many years, with the income tax relief coming to the right audiences.
In conversation with CNBC-TV18, Raamdeo Agrawal said he sees additional money accumulating in the hands of the taxpayers, thus boosting consumption. "Clearly, when your income level is about Rs 15-24 lakh and you get a benefit of about Rs 70,000-80,000, that money will go into consumption, and that is what the market is betting on," Raamdeo said.
"Steady macro and government initiatives such as stable taxes are expected to further help ITC to sustain volume growth," a Motilal Oswal note said.
Ahead of the Budget, experts had said ITC sees a low chance of a sharp cigarette tax hike in the budget, given last year's small increase. Historical data shows that steep tax hikes lead to limited revenue growth and a rise in illicit trade.
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