ITC, Radico Khaitan, VST: How to trade sin stocks amid GST reforms?

Technical charts show that alcohol and tobacco-related stocks such as ITC, VST Industries and United Spirits seem to be unfavourably placed, and could fall up to 18 per cent from here.

Shares of alcohol beverages, and tobacco products are in focus amid talks of likely higher taxes on these products.  According to reports, the finance ministry has proposed a 40 per cent 'sin tax' on alcohol and tobacco related products. The government is planning a major overhaul of the Goods and Services Tax (GST) structure, wherein a majority of the daily-use products could be shifted to lower GST slabs.  Prime Minister Narendra Modi in his Independence Day speech suggested that the 'next-generation' GST reforms may be announced as a Diwali gift to the common man.  So while broader sectors could benefit from lower GST rates, alcohol and tobacco related companies may face the ire, suggest reports. READ MORE  Given this background, here's a likely trading strategy on alcohol and tobacco-related stocks. 

Sin tax in focus amid GST reforms: Technical outlook on alcohol, tobacco-related stocks

ITC

Current Price: ₹406  Likely Target: ₹332  Downside Risk: 18.2%  Support: ₹405; ₹401; ₹396  Resistance: ₹412; ₹418; ₹440  ITC stock has been trading with a negative bias since the breakdown in early July. On the daily chart, the stock is seen trading below the key moving averages, with shorter-term averages seen drifting towards the longer-term averages. 

 

    At present, the stock is seen seeking support around the lower-end of the Bollinger Bands at ₹405 levels; below which support for ITC stock exists around ₹401 and ₹396 levels. Break and sustained trade below these support levels shall open the doors for an extended slide towards ₹345 - ₹332 levels, shows the long-term chart.  The near-term bias at the counter is likely to remain negative as long as ITC trades below ₹440. The stock is likely to face interim resistance around its 200-Day Moving Average (200-DMA), which stands at ₹412 and ₹418 levels. 

Godfrey Phillips

Current Price: ₹9,770  Likely Target: ₹8,820  Downside Risk: 9.7%  Support: ₹9,500; ₹9,000  Resistance: ₹10,300; ₹10,800  Godfrey Phillips has been trading on a bullish note across time-frames. The stock has hit a new life-time high at ₹11,444 on August 7. At present levels, the stock has shed 14.6 per cent from its peak in the last eight trading sessions. 

 

    Having said that, the near-term bias for the stock is likely to remain favourable as long as the stock trades above ₹8,820 levels, with interim support visible around ₹9,500 and ₹9,000 levels.  The stock is likely to consolidate in the near-term, with resistance likely on the upside around ₹10,300 and ₹10,800 levels. 

VST Industries

Current Price: ₹271  Likely Target: ₹230  Downside Risk: 15.1%  Support: ₹257  Resistance: ₹276; ₹282  VST Industries is seen trading with a negative bias, below the key moving averages on the daily and weekly time-frames. Charts suggest the stock could dip towards the 100-Month Moving Average (100-MMA), which stands at ₹257 levels; below which retest of the calendar year low around ₹230 levels seems likely. 

 

    The near-term bias is likely to remain tepid as long as the stock sustains below ₹287. On its way up, the stock is likely to counter resistance around ₹276 and ₹282 levels. 

Radico Khaitan

Current Price: ₹2,843  Likely Target: ₹3,350  Upside Potential: 17.8%  Support: ₹2,795; ₹2,710; ₹2,615  Resistance: ₹3,060; ₹3,200  Radico Khaitan stock has witnessed a phenomenal 1,250 per cent rally from its Covid-19 low of ₹218 to a record high of ₹2,940 this August. The stock seems to be favourably placed on the charts, with the bullish trend likely to remain intact as long as the stock holds above ₹2,615 levels. Interim support for the stock can be anticipated around ₹2,795 and ₹2,710 levels. 

 

    On the upside, the stock is likely to target ₹3,350 levels in the coming months. The stock may face interim resistance around ₹3,060 and ₹3,200 levels, suggests the long-term chart. 

United Spirits

Current Price: ₹1,309  Likely Target: ₹1,120  Downside Risk: 14.4%  Support: ₹1,300; ₹1,260; ₹1,230  Resistance: ₹1,363; ₹1,465  The near-term bias for United Spirits is likely to remain negative as long as the stock quotes below ₹1,363; above which the upside seems capped around ₹1,465 levels. 

 

    At present, the stock is seen testing support around its 100-Week Moving Average (100-WMA), which stands at ₹1,300. The stock has been respecting this 100-WMA support since the end of May 2023; hence is likely to act as a key support yet again.  However, in case, the support is violated the stock may extend the fall towards ₹1,120 levels, with interim support visible around ₹1,260 and ₹1,230 levels.