ITC shares took centre stage after the Budget when the government announced an increase in the National Calamity Contingency Duty (NCCD) on cigarettes after a three-year gap.

Shares in the counter plunged more than 5% after Finance Minister Nirmala Sitharaman announced on February 1 that the NCCD duty on cigarettes would be increased by 16%. However, it recovered quickly and closed in the green. The stock has risen more than 10% since then.

On February 1, the stock hit a daily low of Rs 329.10 and reversed losses to close in the green at Rs 361.40, up 2.57%. The stock closed nearly 5% higher at Rs 378.60 on February 2 and hit a new 52-week high of Rs 384.70.

The stock’s momentum continued on Friday, February 3, ahead of the release of third-quarter results. The stock closed at Rs 380.70. The Kolkata-based company is scheduled to release its December quarter results today.

Domestic brokerage Sharekhan said that in the Union Budget 2023, the announced increase in NCCD duty on cigarettes was only 2%. “The recent increase was well below expectations of 5-10%,” the brokerage firm said in its note, adding that it “would not have a significant impact on ITC’s cigarette sales volumes.”

The NCCD is part of the overall tax on cigarettes. The total tax burden on cigarettes is about 52.7%. This includes GST, GST and NCCD. NCCD accounts for about 10% of the total tax.

With the latest hike in NCCD, cigarette companies will have to increase prices by 2-3%. Minimal hikes can be quickly passed. At the same time, global brokerages have given buy ratings on the counter.

So far, ITC stock has returned 15% in 2023. Over the past year, the stock has risen by 62%.