Budget 2024 effect: ITC shares cross Rs 500 mark for first time; two factors behind the rally

Shares of FMCG major ITC hit their record high on Wednesday a day after the Union Budget 2024. ITC shares also crossed the Rs 500 mark intra day for the first time ever, thanks to no hike in the tobacco tax in Budget. ITC derives a majority of its revenue from cigarattes. ITC shares rose 3.76% to a high of Rs 510.60 against the previous close of Rs 492.05 on BSE. Total 9.94 lakh shares of the FMCG firm changed hands amounting to a turnover of Rs 50.04 crore.

Market cap of the firm climbed to Rs 6.21 lakh crore. The stock fell to its 52 week low of Rs 399.30 on March 12, 2024.

ITC stock has a one-year beta of 0.6, indicating low volatility during the period.

In terms of technicals, the relative strength index (RSI) of ITC stock stands at 79.3, signaling it's trading in the overbought zone. ITC shares are trading higher than the 5 day, 10 day, 20 day, 30 day, 50 day, 100-day and 200-day moving averages.

Shares of ITC ended 6.5% higher at Rs 496.95 on July 23.

Apart from no change in tobacco tax, the rural impetus in the Budget  brought positive sentiment around the stock. ITC is seen as beneficiary from the potential recovery in rural demand, which will also aid the non-tobacco business of the company, including FMCG and Agri, said brokerages.

Finance Minister Nirmala Sitharaman on Tuesday allocated Rs 1.52 lakh crore for agriculture and allied sectors in the Budget for 2024-25 fiscal. Stating that agriculture was a key agenda of the government, she said productivity and resilience will be in focus when formulating policies.

The FM raised rural allocation in the Union Budget by 12%.

Brokerage firm Macquarie has initiated coverage on ITC with a price target of Rs 535. The company's Cigarette business still has more room to grow, it said while assigning an "outperform" rating.

ITC's non-cigarette Earnings Before Interest and Tax (EBIT) may rise to 35% to 40% of the company's overall EBIT in the next 10 years, from the current levels of 20%, according to Macquarie's note.

Jefferies has also upgraded the stock from "hold" to "buy" and hiked its price target to Rs 585 from Rs 435 earlier.