Shares of diversified conglomerate ITC are experiencing a notable reduction in selling pressure, but market analysts are urging investors to remain highly cautious. The stock has faced significant headwinds, largely due to a substantial increase in cigarette taxes earlier this year.
Analysts Warn of Continued Downside Risks
Hitesh Rathi, Technical Analyst (Equity & Derivatives) at Angel One, noted that after breaking below its critical support zone of Rs 375–380 and confirming a bearish Head and Shoulders pattern, ITC has been under sustained selling pressure. While the stock is now nearing an important support level and selling may be showing signs of exhaustion, Rathi cautions that the broader trend remains weak. He suggests a near-term relief rally or sideways consolidation is possible, but investors should stay vigilant. A decisive close below the Rs 270 mark could trigger a fresh wave of selling.
Similarly, Virat Jagad, Sr. Technical Research Analyst at Bonanza, highlighted that ITC remains under pressure on the daily chart following a sharp breakdown below the long-term support zone near Rs 300. Jagad observed the price action forming lower highs and lower lows, with the Relative Strength Index (RSI) hovering around 33, indicating weak momentum despite being close to the oversold region. He stated that sellers remain in control as long as ITC trades below Rs 300–305, with downside risks towards Rs 275 and Rs 265. Immediate resistance levels are identified at Rs 300 and Rs 320.
Technical Indicators Signal Weakness
The stock is currently trading below all its key moving averages—the 20-day, 50-day, 100-day, and 200-day Daily Moving Averages (DMAs)—which underscores a sustained weakness in its broader trend. With its RSI at 32.6, ITC shares are nearing the oversold zone, typically defined as below 30, where selling often outweighs buying.
Amidst its recent losing streak, ITC shares plummeted to a 52-week low of Rs 275 on June 4. Investors have seen a significant erosion of wealth, with the stock losing 31% over the past six months and 33% over the last year. The company's market capitalization stands at Rs 3.5 lakh crore.
Impact of Cigarette Tax Hike
A primary driver of the stock's decline has been the government's decision to increase cigarette taxes, effective February 1, 2026. This policy change replaced the old compensation cess structure, elevating the core Goods and Services Tax (GST) on cigarettes from 28% to 40% of the retail price. This regulatory shift contributed to a 23% fall in ITC's stock price during 2026 alone.
Investor Outlook: Proceed with Caution
While some technical indicators suggest a potential pause in the aggressive selling, the underlying sentiment and fundamental pressures, particularly the increased taxation on its core tobacco business, continue to warrant a cautious approach from investors. The consensus among analysts points to a fragile recovery at best, with significant downside risks still present.