Correction in ITC shares overdone - Goldman

Mon Jan 14, 2013 12:47pm IST

A man talks on his mobile phone as he walks past an ITC office building in Kolkata September 4, 2012. REUTERS/Rupak De Chowdhuri/Files

A man talks on his mobile phone as he walks past an ITC office building in Kolkata September 4, 2012.

Credit: Reuters/Rupak De Chowdhuri/Files

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Reuters Market Eye - Goldman Sachs believes a recent correction in cigarette maker ITC Ltd (ITC.NS) shares is overdone, offering a buying opportunity.

ITC is down 10.6 percent since index compiler FTSE cut its free-float weighting on the stock in mid-December, adding to lingering concerns India would implement a plain packaging norm or bigger warning pictures for cigarettes.

Goldman said ITC offers "an attractive risk-reward" given the cigarette maker has "robust" pricing power and will benefit from the launch of new cigarettes.

An analysis of nine markets that have introduced large pictorial warnings since 2001 did not make a difference in smoking patterns, either on prevalence or premiumisation, says the investment bank.

ITC shares were up 1.1 percent as of 12:27 p.m.

(Reporting by Manoj Dharra)

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