ITC shares in bear grip, oversold on charts; what should investors do?

Shares of ITC are stuck in bear grip amid the ongoing market correction. The FMCG stock is trading below Rs 400 for the fourth consecutive session. ITC stock looks weak in terms of technicals too with its RSI falling below 30, implying the scrip is oversold on charts. The RSI stands at 28. The large cap stock is also trading near its 52-week low of Rs 377.74 reached on March 12, 2024. 

ITC stock has a PE ratio of 24.65 compared to the sector PE of 24.05. Its price-to-book ratio stands at 6.60. 

In the current session, ITC shares gained 0.48% to Rs 396.75 on BSE against the previous close of Rs 394.85 on BSE. Market cap of the firm stood at Rs 4.96 lakh crore. Total 1.58 lakh shares of the FMCG firm changed hands amounting to a turnover of Rs 6.27 crore on BSE. 

In some respite for ITC investors, Kotak Institutional Equities has a price target of Rs 500. 

ITC reported 8.6%, 1.6% and 2.1% YoY growth in revenues, EBITDA and profit after tax in Q3FY25. 

Considering ITC Hotels’ demerger and margin pressure, Kotak Equities has trimmed FY25-27E EPS. The brokerage sees earnings to grow by 7.0% in FY26 and grow by 9.0% in FY27.

ITC stock is currently trading at a valuation of 20.9x P/E FY27E EPS. Kotak values ITC using Sum of the Parts (SoTP) methodology. It has an ‘Add’ rating on the FMCG stock. 

Jigar S Patel from Anand Rathi said, "Support will be at Rs 390 and resistance at Rs 410. A decisive move above the Rs 410 level may trigger a further upside of Rs 420. The expected trading range will be between Rs 390 and Rs 420 for the short-term."

Gaurav Bissa, VP, InCred Equities said, "ITC has witnessed correction in line with the fall seen in the benchmark indices. However, it is still trading in formations of higher highs and higher lows which is the characteristic of an uptrend. The immediate support lies at Rs 475 levels and a move below this will result in a lower low formation, which can result in further correction."

AR Ramachandran, SEBI registered Independent analyst says, "ITC is slightly bullish on the Daily charts with strong support at Rs 391. A daily close above the resistance of Rs 402 could lead to a target of Rs 428 in the near term."

Ameya Ranadive, Chartered Market Technician, CFTe, Sr Technical Analyst, StoxBox said, "ITC has shown signs of reversal after bouncing from the key support zone of Rs 390- Rs 395. The stock was in an extended downtrend but has rebounded as the RSI recovered from oversold levels, indicating potential strength. However, a decisive buy entry is confirmed only if ITC sustains above Rs 415. If the stock holds above this level, an upside move towards Rs 440 can be expected. The volume spike accompanying the recent rebound adds further conviction to the recovery. The trend remains cautious below Rs 415, and failure to surpass this resistance could lead to consolidation.

"On the downside, Rs 386 remains a crucial support level, and a breach of this zone would negate the bullish view, potentially triggering further weakness. Traders should wait for confirmation above Rs 415 before initiating fresh long positions, keeping a stop-loss below Rs 386. Overall, ITC presents a promising opportunity, but confirmation of strength above 415 is essential before entering long trades," added Ranadive. 

Mandar Bhojane, Equity Research Analyst, Choice Broking said, "ITC is currently trading at the levels of Rs 396.1, experiencing a strong downtrend after reaching its peak near Rs 498.85. The stock has consistently formed lower highs and lower lows, indicating persistent bearish momentum. The price is struggling to find support as it continues to trade below key moving averages. There are no clear signs of a reversal yet, indicating that the downtrend is still intact. The 20-day, 50-day, 100-day, and 200-day EMAs are all positioned above the current price, acting as dynamic resistance levels. Immediate resistance is seen at Rs 409, followed by Rs 424, which aligns with the 20-day and 50-day EMAs."

"On the downside, key support is located near Rs 385. A breakdown below this level could extend the weakness toward Rs 375 - Rs 365. The Relative Strength Index RSI is currently at 30.30, indicating bearish momentum and suggesting that the stock remains under selling pressure. Despite occasional attempts to recover, the stock has struggled to gain momentum, with no strong reversal signals at this stage," said Bhojane. 

JM Financial has a buy rating on the stock with a price target of Rs 515. 

"Among the cyclical businesses, Hotels did better both on sales & profitability. Factoring weak Q3 and hotels demerger, we have cut our FY25-27E EPS by c.3-6%. Resilient volume & taxation stability in Cigarettes is positive; pricing actions will be key for acceleration in EBIT growth. Similarly, pace of recovery in FMCG needs to be watched due to heightened competitive scenario in Foods. Demerger of Hotels business should reduce capex intensity & help improve ROIC. JM Financial maintains a BUY call with a revised target price of Rs 515 (28x Dec-26 EPS)," said the brokerage post Q3 earnings. 

Nuvama has a price target of Rs 571 on the stock. The brokerage said it stays cautious in near term given the ongoing urban slowdown, inflation in key raw material and weak profitability in FMCG and paperboards, paper and packaging segment. Brokerage Nirmal Bang has a hold rating on the stock with a price target of Rs 480. The brokerage is constructive on ITC from a medium term perspective, but sees limited upside in the stock.