ITC, UB, Delta Corp: Trading strategies for sin stocks ahead of Budget 2025

Technical charts indicate that shares of ITC, Godfrey Phillips, VST Industries, Delta Corp and United Breweries could slide up to 28% from present levels. Check key levels here

Shares of alcohol, tobacco and gambling related companies are considered as 'sin' stocks by ethical investors due to the perception of profiting from human weaknesses and vices. These companies are highly regulated, taxed compared to other companies.  In the Budget, tax on such companies is often referred to as 'sin tax' as the government imposes higher taxes on such business activities to wean people off bad habits. In the July 2024 Budget, the finance minister Nirmala Sitharaman had left the 'sin tax' untouched.  At present, cigarettes and tobacco related products attract the highest tax rate - GST (Goods & Services Tax) of 28 per cent; coupled with the National Calamity Contingent Duty (NCCD) of 16 per cent. Globally, the World Health Organisation (WHO) has recommended a minimum tax burden of 75 per cent on all tobacco-related products.  Meanwhile, alcohol attracts VAT (Value Added Tax), customs duty and other state-government related levies. Reports suggest that the government gets up to 80 per cent of the liquor price as taxes. Whereas, online gaming and gambling attracts a flat 30 per cent tax.  What is sin tax? Watch Video  The Union Budget for the financial year 2025-26 will be presented on Saturday, February 01; industry experts anticipate a potential hike in 'sin tax' especially for products related to tobacco. As such, what should be your trading strategy in these counters?  Here's a technical outlook on 5 so-called sin stocks:  ITC  Current Price: Rs 438  Downside Risk: 14.8%  Support: Rs 435; Rs 430  Resistance: Rs 450; Rs 455  ITC stock post the spin-off of the hotel business has been trading in a tight range of Rs 430 - Rs 450 for the last four weeks. Technically, the stock is seen testing support around its 100-DMA (Daily Moving Average) at Rs 435 and the 20-MMA (Monthly Moving Average) at Rs 443. Break and sustained trade below the same can trigger a dip towards Rs 397; below which a test of Rs 373 levels seems likely. CLICK HERE FOR THE CHART  The short-term trend for ITC is likely to remain negative as long as the stock trades below Rs 464; interim resistance for the stock is seen at Rs 450 and Rs 455.    Godfrey Phillips  Current Price: Rs 4,380  Downside Risk: 17.8%  Support: Rs 4,000  Resistance: Rs 4,590; 4,900  Godfrey Phillips stock is seen quoting below its 50-WMA (Weekly Moving Average), which stands at Rs 4,590, for the first time since May 2023. The stock has almost halved (down 50 per cent) from its September 2024 high of Rs 8,189. CLICK HERE FOR THE CHART  The stock seems on course to test the super trend line support on the monthly scale around the Rs 4,000-mark. The stock has held above this long-term support since June 2009. Break of the same, can trigger a slide towards Rs 3,600 levels. The near-term bias for the stock is likely to remain negative as long as the stock trades below Rs 4,900.  VST Industries  Current Price: Rs 314  Downside Risk: 18.8%  Support: Rs 295  Resistance: Rs 340  VST Industries has been trading below the key moving averages for the last four months on the daily scale. On the downside, the stock has strong support at Rs 295. In case, that is broken, then the stock can potentially fall to Rs 255 levels. On the upside, the stock needs to trade consistently above Rs 340 to revive the mood at the counter. CLICK HERE FOR THE CHART    United Breweries (UB)  Current Price: Rs 2,037  Downside Risk: 21.5%  Support: Rs 1,850  Resistance: Rs 2,180  United Breweries is seen consolidating in the broad range of Rs 1,850 - Rs 2,180 since the last nine months. An upside breakout from this trading range can lead the stock to a new high around Rs 2,250 levels. On the other hand, a downside breakout can drag the stock towards Rs 1,600 levels. CLICK HERE FOR THE CHART  Delta Corp  Current Price: Rs 100  Downside Risk: 28%  Support: Rs 94; Rs 81  Resistance: Rs 110; Rs 117; Rs 120  Delta Corp last week witnessed a downside breakout on the weekly chart. Further, the stock is seen trading below the 200-MMA, which stands at Rs 110. Thus, even though the stock is trading in a fairly oversold zone, the bias at the counter is likely to remain negative as long as stock trades below Rs 117 - Rs 120 range. On the downside, the stock can potentially slide towards Rs 72; with interim support expected around Rs 94 and Rs 81. CLICK HERE FOR THE CHART