Relative Strength Analysis of ITC as it Scales to a ‘3-Year High’!

  • Stock Market Analysis

When stocks are being trolled for their lacklustre performance in the stock market, one name that always comes to investors’ minds is ITC Ltd (NS: ITC ). It is one stock that always attracts attention from trollers and is also being tagged as the ‘meme stock’.

However, rising above all the trolling, ITC today has shown its true strength. The share price of ITC scaled to a new 52-week high of INR 285, which was last seen in May 2019. The stock had been rising since the beginning of the session as the broader markets were in deep red, especially the energy sector. Today’s move has even strengthened the relative strength of the stock which was already strong since the beginning of the year. 

Comparative chart of ITC, Nifty 50 and Nifty FMCG

Image Description: YTD comparative chart of ITC (Blue), Nifty FMCG (Purple) and Nifty 50 (Red)

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As of the last closing of INR 284.35 on 1 July 2022, shares of ITC have delivered a lucrative return of 30.41% this year, which is quite impressive considering a 9.23% fall in the benchmark Nifty 50 . Also, when compared with the Nifty FMCG index, which constitutes 15 companies from the FMCG sector, the outperformance of ITC shares was clearly seen as the former delivered a mere 4.45% return in the same period. In fact, almost one-third of the gains of Nifty FMCG have come from ITC alone as it is the heaviest constituent of the index, accounting for a 31.06% weightage.

YTD Comparative chart of ITC with its major competitors

Image Description: YTD comparative chart of ITC (Blue), Britannia (Yellow), Hindustan Unilever (Purple), Marico (Green), Nestle (Pink) and Dabur (Red)

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Compared to its major peers, ITC outshines them all. As can be seen from the daily YTD chart above, the price rise of ITC is in a different league. No other major competitor has even been able to come close to the returns delivered by ITC this year. Looking at the gains - Dabur India Ltd. (NS: DABU ) (-10.55%), Nestle (NS: NEST ) (-8.3%), Marico Ltd (NS: MRCO ) (-2.97%), Hindustan Unilever Ltd. (NS: HLL ) (-1.86%) and Britannia Industries Ltd (NS: BRIT ) (0.29%), one thing is also to be noted that all of them have delivered a negative return this year, except Britannia which has barely made it to the green zone. 

Clearly, the turtle of the race has picked up speed this year and is now winning the race with a big margin. 

Now, what’s ahead?

The ITC shares have given a weekly closing at the highest level since May 2019 and can easily be quoted as one of the strongest in the Nifty 50 pack right now. There is no sign of weakness as of now and the weekly volume of over 89.8 million shares which is the highest volume since the week ended 22 May 2022 shows mass participation in the ongoing rally.

Image Description: Weekly chart of ITC

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The next visible hurdle is present around INR 310, which still projects a decent upside of INR 25 from the current levels. Talking about the support level, INR 258 seems to be a decent buying zone for the stock on the weekly chart.

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