BofA-ML hikes target on ITC; Jefferies upgrades HUL

Global brokerage Bank of America Merrill Lynch on Thursday upgraded its target on cigarette maker ITC, while retaining its "buy" call on the stock. BofA-ML hiked its target on ITC to Rs 345 (from Rs 315 currently), indicating a 14 per cent upside in the stock from the current market price of Rs 301.50.

ITC is close to increasing cigarettes prices sharply, BofA-ML said, which will limit the impact on margins due to tax hikes. Many state governments have already hiked taxes on tobacco products even as Finance Minister P Chidambaram proposed to increase the specific excise duty on cigarettes by about 18 per cent in the Union Budget. (Also read: Why ITC scores over HUL in battle among equals)

Volumes may remain under pressure but there is limited risk to earnings, the brokerage said.

Indian stock markets have been volatile with the benchmark Nifty moving in a broad range over the last few weeks. Traders have increased bets on defensives such as ITC and HUL, India's biggest FMCG firm.

Jefferies has upgrade HUL to "hold" from "underperform" and increased its target price on the stock to Rs 465 from Rs 434 earlier.

There is limited downside from current levels, Jefferies said, adding that HUL is relatively well placed in the current environment.