ITC shares hit fresh 52-week high; does this rally have more legs?

Shares of ITC hit new record highs during Tuesday's trading session. The FMCG major has delivered super solid returns to the investors, thanks to its strong and steady performance and price movement, coupled with heavy volumes.

ITC's stock gained about a per cent to hit Rs 466.05 on Tuesday, its 52-week high, before giving up its gains. The stock has settled at Rs 462.95 on Monday. The total market capitalisation of ITC was hovering around Rs 5.8 lakh crore, making it the sixth largest listed entity on Dalal Street.

Reliance Industries (RIL), Tata Consultancy Services (TCS), HDFC Bank, ICICI Bank and Hindustan Unilever (HUL) are five entities have more market cap then ITC. Other companies such as Infosys, State Bank of India, Bharti Airtel, Bajaj Finance and LIC of India lag ITC in terms of market capitalization.

Shares of the FMCG giant have surged about 65 per cent from its 52-week low at Rs 284.85, while it has delivered a return of more than 210 per cent from its Covid-19 lows. The stock has more than doubled in the last one and a half years.

Analysts recoding the technical charts suggest that the rally in ITC's stock has more legs left in it. They believe that investors should accumulate the stock on dips for further upside as both technical indicators and fundamental measure remain strong for the cigarette manufacturer.

The stock is trading with positive price action and also recorded a new life high. However, looking at the momentum indicator, that is, MACD and Relative strength chart against Nifty-50 shows the clear negative divergence with the price, said Riches Vanara, Technical and Derivatives Analyst at Stoxbox.

"The derivatives data of the July series also indicates a level of Rs 460 as strong resistance zone. Hence, we will be cautious on the stock at the current levels and will wait for some pull back towards levels of Rs 442-435 for fresh entry," he said.
 

We had recommended ITC at Rs 440 range for Rs 460, Rs 475, Rs 490, Rs 500, Rs 520 and Rs 550 and it made a high of Rs 466, said VLA Ambala, research analyst at Stock Market Today. "It is a safer investment bet among equity space, considering the past performance and its business. One can hold it for further gains with trailing stop loss at Rs 420."

This stock is touching highs and there are some good reasons behind it. Firstly, it is a stable sector and it is a quality stock in terms of financials and management. On the other hand, its high dividend yield makes it an attractive bet. ITC is trading at a P/E multiple at 29.70 times, which is at discount compared to the sector average, she added.

Established in 1910, ITC is the largest cigarette manufacturer and seller in the country. ITC operates in various business segments at present including FMCG business, hotels, paperboards, paper and packaging, and agri business. The company had dividend yield of 2.77 per cent with return of equity (ROE) at 29.1 per cent and return on capital employed at 39.1 per cent.

ITC on its quarterly charts has been on a dream run, post a panic fall in March 2020. It can be observed that the stock is in its thirteenth quarter of rise, post the fall and is heading for a target of Rs 510 levels, said Sujit Deodhar, Head Technical Analyst at Wellworth Share & Stock Broking.

"Investors holding on to their long positions can use the target of Rs 510 as partial profit booking opportunity and should try to add the stock at some discounted levels, as both time and price theory indicates that it’s time for this stock to take a breather for next few quarters," he said.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Business Today)

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