ITC Limited shares recently plummeted to a fresh 52-week low of Rs 286 on May 29, marking a challenging period for investors. This significant dip has pushed year-to-date losses for shareholders to 21%, with six-month and one-year losses standing even higher at 29% and 31% respectively.
Why ITC Shares Are Under Pressure
The sustained selling pressure on ITC stock this year can be attributed to several key factors. A major catalyst was the government's overhaul of tobacco taxation in February 2026. This involved replacing the compensation cess with GST and simultaneously increasing excise duties on cigarettes. The move substantially raised the indirect tax burden on cigarette manufacturers, sparking investor concerns over potential volume growth and overall profitability.
Further contributing to the decline, the stock reacted negatively to rebalancing adjustments by MSCI during the final trading minutes on May 29. This combination of regulatory changes and market adjustments has led to a bearish trend, with ITC shares trading below all key short-term and long-term moving averages, signaling subdued investor confidence.
Analysts Divided on ITC's Future Outlook
Despite the recent headwinds, brokerages remain divided on ITC's near-term prospects, though many still identify underlying value in the diversified conglomerate. Here's a look at some key analyst perspectives:
- Systematix: Maintained a 'Hold' rating with a target price of Rs 355. They highlighted resilient operating performance, noting 6.5% year-on-year cigarette volume growth and 11% growth in the FMCG business, driven by staples like atta and biscuits.
- Antique Broking: Assigned a target price of Rs 408, expressing confidence in the company's earnings outlook and its diversified business model.
- Sharekhan: Remained constructive on ITC, setting a target price of Rs 400. The brokerage believes ITC's attractive valuation and balanced presence across cigarettes, FMCG, hotels, and agribusiness provide a strong foundation for future growth.
- UBS: Reiterated a 'Buy' rating with a target price of Rs 395. UBS anticipates that ITC's revised pricing strategy will help safeguard cigarette volumes despite the recent tax hikes.
ITC's Strategy to Mitigate Tax Impact
In response to the increased tax burden, ITC has adopted a three-pronged pricing strategy aimed at minimizing the impact on demand and safeguarding cigarette volumes. This approach includes maintaining same-price offerings across key price-sensitive variants, a move expected to stabilize demand. UBS analysts believe this strategy, combined with strong performance in its non-cigarette segments, could see ITC's earnings performance in FY27 surpass more conservative market expectations.
As ITC navigates these regulatory and market challenges, investors are closely watching whether the current 52-week low represents a significant risk or a potential opportunity for long-term growth.