Stock in Action – ITC ltd

ITC Stock Movement of the Day

ITC Intraday Analysis

1. ITC stock is trading above simple moving averages of 5 days, 10 days and 20 days but below the simple moving averages of 50 days, 100 days and the 200 days.
2. Current Price and Volume: The stock opened at ₹435.00 and closed at ₹404.45 with a significant volume of 98,993,355 shares traded, indicating high market activity.
3. VWAP and Beta: The Volume Weighted Average Price (VWAP) stands at ₹428.00, suggesting the average price at which investors traded throughout the day. The Beta of 0.74 implies the stock's lower volatility compared to the market.
4. Pivot Levels: The Pivot Point (PP) is calculated at ₹403.43, with R1 (Resistance 1) at ₹407.52 and S1 (Support 1) at ₹400.37.

Probable Rationale behind the ITC Stock Surge

The recent surge in ITC's stock price can be attributed to several vital developments surrounding company, primarily block deal initiated by British American Tobacco (BAT), one of its major shareholders. BAT's decision to sell a 3.5% stake in ITC through  block deal valued at approximately ₹ 17,500 cr has sparked investor interest & led to a surge in the ITC stock price.

ITC Stock Movement Key Points

1. Strategic Stake Sale by British American Tobacco (BAT)
BAT, the parent company of ITC, announced its intention to sell a portion of its stake in the FMCG giant ITC. The stake sale, aimed at reducing BAT's shareholding in ITC, was executed through block deals to institutional investors. This strategic move by BAT to divest its stake in ITC has garnered attention from market participants.

2. Proceeds for Share Buyback
The proceeds from the stake sale are expected to be utilized by BAT for initiating a share buyback program. This decision reflects BAT's confidence in ITC's performance and its commitment to enhancing shareholder value. The share buyback program is likely to further bolster investor sentiment towards ITC.

3. Analyst Upgrades
The announcement of BAT's stake sale and the subsequent surge in ITC's stock price prompted positive sentiments from market analysts. While Goldman Sachs maintained a buy rating on ITC, CLSA upgraded its rating to buy. This analyst consensus reflects optimism regarding ITC's growth prospects and potential value appreciation.

4. Impact on Shareholding Structure
Following the stake sale, BAT's shareholding in ITC decreased from 29% to 25.5%. This adjustment in the shareholding structure may have positive implications for ITC's corporate governance and operational autonomy.

5. Enhanced Liquidity and Share Supply
Block deal facilitated by BAT has injected liquidity into ITC's shares and increased the supply of shares available in the market. This increased liquidity may attract more investors and contribute to a more efficient price discovery process.

6. Strategic Intent of BAT
BAT's decision to divest its stake in ITC aligns with its strategic objectives and financial goals. The company aims to optimize its capital allocation and prioritize initiatives that generate sustainable returns for its shareholders.

7. Market Perception
Despite short-term fluctuations, experts view the stake sale as a positive development for ITC. The increased share supply and potential for improved corporate governance are perceived as favorable factors that could drive long-term value creation for ITC shareholders.

ITC Pros    

1. ITC is almost debt free.
2. Indian Tobacco Company has a good return on equity (ROE) track record: 3 Years ROE 25.0%
3. Tobacco giant has been maintaining a healthy dividend payout of 98.0%
4. ITC's working capital requirements have reduced from 29.1 days to 20.1 days

ITC Cons  

1. Indian Tobacco Company Stock is trading at 7.77 times its book value
2. Best Tobacco company has delivered a poor sales growth of 10.3% over past five years.

Conclusion

Tobbaco Giant, ITC surge in ITC's stock price following BAT's stake sale reflects market confidence in the company's prospects and strategic initiatives. The stake sale is expected to unlock value for shareholders and enhance ITC's long-term growth trajectory. However, investors should closely monitor further developments and assess the impact on ITC's financial performance and market positioning.