The stock of ITC has rallied by more than 30% in the period the last 1 month to 1.5 months. The stock was hovering around the level of Rs. 200 and now is witnessing an upward rally and has also reached 52-week high levels of Rs. 273. So, let’s discuss the triggers or factors behind this rally in the ITC Stock price in this article as we move ahead.
Key Triggers for Rally in ITC Stock:
1) Anti-ESG Sentiment at Play:
- ITC is having diversified business interests that spread to the sectors and segments like FMCG-Others, FMCG-Cigarettes, Agri-business, Hotels, Information Technology, and Paper & Packaging.
- The company derives the majority of its revenue and profitability from its FMCG-Cigarette business, but the company is now more focused on other major businesses like FMCG- Others, Agri-business, and IT on account of Environment, Social, and Governance (ESG) parameters as Tobacco business yields negative ratings on Environment and Social factors. And thereby, generally, Institutional Investors stay away from such stocks which are also termed ‘Sin Stocks’.
- Now, there is another angle developing in the market with the emergence of Anti-ESG Sentiment globally majorly due to Anomalies in ESG Investing
- So, the Tobacco/Cigarette sector has surged in Volatile Market environments Ignoring the ESG concerns. Hence, ITC stock is highly benefited by this Anti-ESG trend.
2) Boost to ITC’s Agri-Business:
- In the Agri-business of ITC, the company also exports wheat. And due to soaring Wheat Prices globally due to the Russia-Ukraine Conflict.
- Ukraine & Russia Contributes around 20-25% of World Wheat Demand and due to their ongoing conflict, the wheat prices have gone up. Here in the Indian market context, ITC is looking to be one of the major beneficiaries from this viewpoint.
- There is a Favorable Export Market Outlook for ITC With India’s All-time High Wheat Production and this may also lead to the growth expansion of margins of its agribusiness.
3) Revival in ITC’s Hotels & Paper Business:
- The lifting of Covid restrictions led to increased mobility and travel which augurs well for ITC’s Hotel business.
- Further, the opening of educational institutions also will offer recovery for the company’s stationery business.
4) Rise in FII Stake in Mar-22 Quarter:
- In the recent shareholding pattern of the company as of March 2022, the Foreign Institutional Investors (FIIs) have increased their stake by 2% from 9.99% in December 2021 to 11.99% in March 2022.
- But the negative point for the company is the decreasing stake of Domestic Institutional Investors (DIIs) and Retail Investors.
- As of March 2022, the stake of Retail Investors stands at 12.06% which was 14.31% in the December 2021 quarter, amounting to a reduction of 2.25%. In March 2022, around 1.56 Lakh retail investors exited the stock.
- Insurance Companies have reduced their stake in ITC from 21.47% in December 2021 to 21.05% in March 2022. Here, LIC has reduced its stake by 0.4% from 16.2% in December 2021 to 15.8% in March 2022.
- The stake of Mutual Fund companies in ITC is at 10.09% in March 2022 going down by 0.61% from the levels of December 2021 of 10.7%.
What Should Investors Do?
A Stock Market is an unpredictable avenue where one does not know about the happenings of an event beforehand. And here in the case of ITC, one cannot say it is the re-rating phase of the stock, but the rising stake of FIIs might prove to be an intial indication of the re-rating of the stock. Hence, one should have a view of long-term investing.
Disclaimer: The information here is provided for reference purposes only and should not be misconstrued as investment advice. Under no circumstances does this information represent are commendation to buy or sell stocks or MF.