The stock of ITC has been the hardest hit post budget. The shares of the company fell 7 per cent on Saturday post the Union Budget and dropped another 3 per cent on Monday. The problem for the company is the announcement of a tax hike on cigarettes.
"The NCCD component has been increased by 2-4 times across stick sizes. This has resulted in tax hikes in the range of 9-15 per cent thereof. The tax hikes, in effect, at the portfolio level is likely to be about 11 per cent, which means the company would need to raise MRP by 6-7 per cent to offset the same," said Edelweiss, downgrading ITC to 'hold' from 'buy'.
However, it's important to note that ITC today derives a significant portion of its revenues from the non cigarette business. In fact, some FMCG stocks like Nestle have surged 6 per cent in trade, while ITC has fallen 10 per cent since the Budget, despite having significant revenues from FMCG.
The company owns brands like Aashirvaad, Sunfeast Biscuits cookies and cakes, Bingo chips and finger snacks, Yipee Noodle and Pasta, B Natural Juices, Vivel Soaps and Bodywash and several others.
A short covering rally on the stock in the coming days cannot be ruled out.