Brokerages cut target price of ITC after excise duty hike on cigarettes in Budget 2015

Investors have dumped shares of cigarette-to-consumer goods maker ITC in the last two trading days after the government, in the Union Budget on Saturday, increased excise duty on cigarettes.

ITC shares, which fell about 5% on Tuesday after a spate of analyst downgrades, have plunged 13% since Saturday, when stock exchanges opened for a special trading session on the Budget day.

Most brokerages cut their target prices, while only a section of them cut their ratings for the stock. But, investors and traders chose to heed the views of brokers including CLSA, which claimed to reverse its positive stance on the stock after seven years on the grounds that volumes would fall.

Since stock valuation is firmly linked to cigarette volume growth, the stock will grind lower in the near term, said Morgan Stanley. Dodging the consensus, HSBC has retained its overweight rating and increased the price target saying a lot of the negative expectations of the excise duty hike has been factored into the stock price.