ITC scales all-time high; should you hold or exit it?

Cigarettes-to-hotel major ITC stock in Wednesday's session despite a subdued market environment has scaled a new all-time high in early trade today of Rs 519.  Primarily investor preference for the defensives including pharma and FMCG pack has helped the upmove.

At the last count, ITC shares traded with gains of 0.6 per cent or Rs 3.1 at Rs 516.55 per share. Whlle, the Nifty FMCG pack in which ITC enjoys the highest weightage of 34.85 per cent as on August 30, 2024 also was last up by 0.75 per cent.

After the company's Q1 results, both Motilal Oswal Financial Services and BOB Capital suggested the most bullish target on the stock at Rs 575, implying further gains of as much as 12 per cent from the previous close.
With a stable tax on cigarettes, we anticipate sustainable growth in the business. We value the cigarette business at 20x Jun’26 EV/EBITDA (earlier 17x EV/EBITDA) and reiterate its BUY rating with an SOTP-based TP of Rs 575 (implied 30xJun’26E EPS).

How do analysts view the stock after today's run-up?

G. Chokkalingam, Founder & Head of Research- Equinomics said at the current price the stock looks good to hold. Upside is not likely to be significant but stretched valuations of most small and mid cap stocks make ITC as one of the most defensive large cap stock at current market conditions, added the expert.

Jigar Patel, Sr. Manager - Equity Research, AmandRathi said, "For the past few weeks, ITC has been consolidating within a range of ₹495 to ₹510. This consolidation phase reflects a period of indecision in the market, where neither buyers nor sellers were in control."

However, recently ITC has managed to break out of this range, moving and sustaining above the upper limit of ₹510. This breakout indicates that buyers are gaining strength, and the stock is likely transitioning from consolidation to a renewed upward movement, he added.

Outlook on ITC stock

Patel said looking ahead, one can expect the stock to potentially reach Rs 530 on the higher side. This target is supported by the technical indicators, particularly the Daily Directional Movement Index (DMI), which is pointing toward bullish momentum. On the downside, the previous resistance at ₹510, now breached, is expected to act as a strong support level. This means that if the stock experiences any pullbacks, the ₹510 level should provide a solid base, preventing further declines and keeping the bullish structure intact.