How to trade ITC stock in the run-up to Jan 1 hotel demerger date

ITC stock surged over 88 per cent after the company's board approved the hotel demerger in August 2023; at present levels, the stock is down 11 per cent from its peak. Key levels to watch out now.

ITC on Tuesday fixed January 1, 2025 as the appointed date and the effective date for the demerger of the company's hotel business.  In an exchange filing on December 17, ITC said the National Company Law Tribunal (NCLT), Kolkata Bench, sanctioned the scheme of arrangement amongst ITC and ITC Hotels and their respective shareholders; copy of which was received by the company on Monday, December 16, 2024.  "All the conditions specified in Clause 28 of the Scheme have been fulfilled and satisfied. Accordingly, the Appointed Date and the Effective Date of the Scheme shall be the first day of the following month i.e. January 1, 2025," the exchange filing read.  Earlier in August 2023, ITC board has approved demerger of its hotel division, and accordingly fixed the share allocation as 1 equity share of ITC Hotels for every 10 equity shares of ITC. Post the effective demerger, ITC will be expected announce the record date for the shareholders, and subsequent listing of ITC Hotels on the bourses.  On the bourses, ITC stock has zoomed over 88 per cent since August 2023 after the announcement of the hotel demerger from levels of Rs 280 to a high of Rs 529 in September 2024. In comparison, the NSE Nifty 50 index surged 33 per cent in the same period.  At present price ITC stock is seen trading 11 per cent below its all-time high. The stock seems to have performed near-about in sync with the Nifty's 7.5 per cent dip from the peak.    Post demerger, ITC will be retaining 40 per cent shareholding in the hotel business, while the rest will be owned by the shareholders.  Analyst at JM Financial expects ITC shareholders to benefit with the market likely to re-rate ITC post-demerger; as the company focuses on its core businesses like - FMCG, tobacco and paper.  Commenting on the rationale behind the expected re-rating, JM Financial in a note said hotels are capital-intensive and typically provide lower margins compared to FMCG and tobacco businesses. A standalone hotel entity allows focussed growth and independent capital raising.  The brokerage firm values the hotel business at Rs 25 per equity share, which translates into 5.3 per cent of ITC's current share market price.    Against this background, here's a technical outlook on the ITC stock at present levels.  ITC  Current Price: Rs 470  Bias: Range-bound likely  Upside Potential: 12.5%  Downside Risk: 15.5%  Support: Rs 463; Rs 457; Rs 442  Resistance: Rs 478; Rs 482; Rs 492  The daily chart of ITC suggests a likely tepid trend, as the stock seems trapped between its 100-DMA (Daily Moving Average) and the 200-DMA; indicating a likely trading range of Rs 457 - Rs 492. The 200-DMA on the downside holds the key as the stock has held its head above the same for the last six months. CLICK HERE FOR THE CHART  The key momentum oscillators, too, are exhibiting a mixed picture; thus an indecisive trend may prevail as long as the stock remains trapped in the above mentioned range.  On the long-term charts, ITC stock is seen testing support around its super trend line on the weekly scale at Rs 463 levels; below which next significant support for the stock exists at Rs 442 - the 20-MMA (Monthly Moving Average) - a key moving average that the stock has not violated since January 2021.  Break and sustained trade below Rs 442 shall open the doors for a likely test of Rs 397 levels. On the upside, the stock needs to break and trade consistently above Rs 492, for a likely bounce back to its record high levels. Interim resistance for the stock is visible at Rs 478 and Rs 482.