Chart check: ITC stock tests 4-year monthly trendline indicator at ₹350

ITC stock is seen trading near its 4-year monthly Supertrend line indicator for the first time since September 2021.

ITC stock shed another 5 per cent to a low of ₹346 on the NSE in early trade on Friday amid follow-up selling pressure at the counter. On Thursday, ITC stock tanked as much as 9.7 per cent to ₹364 levels after the government announced a sharp hike in taxes on tobacco products.  In the process, ITC stock is seen testing the 50-Month Moving Average and the key monthly Supertrend line indicator for the first time in more than 4 years. 

Here's a look at ITC stock chart:

ITC's monthly chart shows that the stock is seen trading close to its Supertrend line indicator, which also coincides with the 50-month moving average (50-MMA) for the first time since September 2021.on technical charts:   

 

    The above chart shows that the monthly Supertrend line indicator for ITC stands at ₹352, while the 50-MMA at ₹348.50.  That apart, the monthly chart shows that ITC stock has been trading below its 20-MMA for the third straight month - a first since December 2020. The yellow-line on the chart is the 100-MMA, which stands at ₹261 levels. 

Here's why ITC stock is under pressure:

  According to the notification, the finance ministry announced an excise duty in the range of ~₹2,050 to ~₹8,500 per 1,000 sticks, depending on cigarette length; which will be in addition to the goods and services tax (GST) rates for tobacco products other than bidis of 40 per cent. The new taxes will come into effect from February 1, 2026.  Post the notification, brokerages have downgraded ITC stock to 'Reduce' or 'Neutral' with analysts fearing an adverse impact on earnings owing to the tax hike.  Analysts at Prabhudas Lilladher lowered the rating on ITC stock to 'REDUCE' and slashed the target price to ₹348 from ₹528 earlier. Meanwhile, JP Morgan downgraded the stock to 'NEUTRAL' with a reduced price target of ₹375 from ₹475.  G Chokkalingam, founder of Equinomics, said the tax hike is substantial and will have an impact on cigarette demand. Further, fears that British American Tobacco (BAT) could dilute its stake further in ITC could put more pressure on the stock, said the analyst. READ MORE  On similar lines, Religare Broking Research in a note, said ITC is set to face near-term margin and volume pressure following the government tax notification. However, ITC's strong pricing power and diversified business model should support medium-to-long-term earnings resilience.  Analysts at Religare said it will reassess ITC's earnings assumptions and valuation once the company outlines its pricing and mitigation strategy.  Disclaimer: The views expressed by the brokerage/ analyst in this article are their own and not those of the website or its management. Business Standard advises users to check with certified experts before taking any investment decisions.