Shares of ITC surged nearly 4 per cent, while those of
, and Phillips India climbed 0.3-1.3 per cent.
“There is nothing on ITC till now. We had highlighted the low probability of any (tax) hike. Stock could re-rate in the near term as stock had corrected in the past two weeks,” said Avneesh Roy, lead analyst with Edelweiss Securities.
Heading into the Budget, some market participants had expected the government to raise taxes on cigarettes in order to boost its revenues by means of a Covid-19 cess or an increase in the National Calamity Contingency Fund.
It is no surprise that the stock had remained weak in January ahead of the Budget announcement, after staging a 26 per cent rally in November and December. Traders had sharply increased their short positions in the February futures contract of ITC, suggesting that they fear a tax hike would come in the Budget.
However, the best case scenario played out for ITC and other cigarette manufacturing companies as the government did not raise any taxes or cess on cigarette products.
Brokerage firm Edelweiss Securities had noted prior to the Budget that finance minister Nirmala Sitharaman had said that demand conditions were not rosy enough for GST hikes.
The brokerage had also said that there was a notable hike in tax on cigarettes in the previous Budget, which made a case for tax hikes in the current Budget unlikely.