Shares of ITC in Monday's session (September 28, 2020) traded higher in line with the benchmark indices which were up by over 1.5%, with Nifty reclaiming 11200 points. This is even as Maharashtra became the first state to put a ban on sale of loose cigarettes and beedis.
The move has been taken with a view to ensure that customers take note of the graphic health warnings on cigarette packs. However analysts hold the view that this ruling is for small retail outlets and its on- ground implementation shall be difficult.
"The news on the Maharashtra ban on loose cigarettes, while very difficult to implement, could affect cigarette volumes (if the implementation is extensive and stringent)," Motilal Oswal Securities said in a note.
ICICI Securities however maintains that if this ruling is extended to other states, ITC can launch small packs of cigarettes having a leaner packaging. Nonetheless, in the short term, the counter is anticipated to witness a sentimentally negative blow.
The loose cigarettes account for as much as 70-80 percent of the overall cigarette volumes throughout the length and breadth of the country. And Maharashtra is among the top states in cigarette consumption in the country. Furthermore, the impact shall be more profound if other states also come up with the similar ruling in the near to distant future.
At 2:40, the stock of ITC was up 1.38% or Rs. 2.35 at Rs. 173.15, while benchmark Sensex index was up 1.44% at 37927 points.