Better to be a trader in ITC than an investor now: Experts

economictimes.indiatimes.com:

ITC should brace themselves for moderate returns here on, as the scorching pace of the rally in the share price in recent months has made the risk-reward unfavourable for now, according to experts. The cigarette-to-consumer goods maker was the best performer on benchmark indices over the last year, logging in gains of nearly 46%. Its shares have more than doubled over a two-year period, testing a lifetime high of nearly ₹500.

Analysts are advising against fresh lump sum investments in the stock as they believe the best of the rally might be over for now. «The rally in ITC from around ₹430 to ₹480 was in anticipation of the demerger being announced,» said Amnish Aggarwal, the head of research at Prabhudas Lilladher. «With this trigger out of the way, investors will now focus on what happens in its key businesses — cigarettes and fast moving consumer goods,» he said.

FMCG and cigarettes together constitute more than 80-85% of ITC's operating profits. Shares of ITC ended at ₹450.2 on the NSE on Wednesday, up 0.2%. Gains in the shares were marginal even after the company announced its quarterly earnings for Apr-Jun after market hours on Monday, and shared details for the demerger of its hotel business.

«ITC's June quarter earnings did not carry the same kind of excitement that was visible in the past few quarters' results,» analysts at JM Financial told their clients in a note. While the performance of the FMCG segment remained robust, volume growth momentum in the cigarette business is waning a tad bit, they said. ITC shares, which have been in a bullish momentum for several months now, are set to see muted returns from here, said Sahaj Agarwal, head of derivatives research, Kotak Securities.