ITC bounces back with vigor

ITC had slumped yesterday to Rs.355 but it opened itself slightly higher today and is now at Rs.362 levels, up over 1.5%. Intra day high was at Rs.366.

The stock had fallen yesterday after the Govt banned sale of unpackaged or loose cigarette sale. This was a big negative for the company as almost 70% of cigarette sold in India is sold loose.

But the stock has bounced back today after Morgan Stanley issued a statement saying that though it was a clear negative for the company, it said banning loose cigarette sale would be very difficult to implement and actually went ahead and urged investors to buy ITC on dips. It even gave free advice to cigarette companies – introduce smaller packs to avoid impact of this new restriction.

Another foreign fund, UBS also maintained its buy call and in fact raised its target to Rs.425. On the other hand, domestic fund, Kotak said that this was bad news for tobacco companies and warned that such policy overhang will continue to haunt the sector.