ITC declines on concerns of cigarette volumes fall

Cigarette major ITC slipped nearly 1 percent on Thursday on reports that cigarette volumes of the company may decline going forward.

Till now four states have already increased value added tax (VAT) on cigarettes after the central government proposed an increase in excise duty on cigarettes in Budget 2013.

Sanjay Singh of Standard Chartered Securities warned that VAT being increased by 450 basis points annually, ITC will have to undertake 20 percent price hike to offset tax burden.

He sees a 3-4 percent decline in cigarettes volume for ITC in FY14. Singh adds that absorption of this price hike will be a challenge for the consumers .

Shares slipped 0.80 percent to close at Rs 304.95 on Bombay Stock Exchange. However, it was the major defensive stock when the market was losing in previous four sessions.

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