ITC made modest gains in early trades today as market men see improved prospects for the company if a reported measure against competitive products is enforced.

The scrip of the cigarettes major with an approach to diversification edged up 1.1% to Rs 771 on BSE. It hit a high of Rs 777.50 (a 52-week) earlier today .

The stock surged 3.5% to Rs 769.20 Thursday last week on solid volumes of 3.8 lakh shares. The following day it slipped to Rs 762.50 amid volatility. It had fallen as much as 3.1% to Rs 745 during the day.

The stock has witnessed a sustained rise over the past few months. . From a low of Rs 611.20 on 24 March 2003, it has gained 26.1% to the current Rs 771.

According to dealers, brokerage Credit Loynnais Securities (CLS) is buying the stock of late. But there was no one saying for sure on whose behalf this was being bought. The recent flare-up in ITC has also come in the wake of rumours that British American Tobacco (BAT) may hike stake in the company.

Sometime ago, however, rumours had surfaced that BAT was in talks with UTI for acquiring UTI's holding in ITC. BAT, then, had denied these rumours, saying that it was comfortable with the existing stake of 32.5% .

Local institutions have a large stake in ITC, with LIC (13.5%) and UTI (8%) being the two largest stake holders among these.

The total mutual fund investment in ITC is Rs 1233.62 crore in May 2003, up 3.5% from the April figure of Rs 1191.90 crore. The exposure is spread across 138 schemes.

Recent reports that the Maharashtra government is planning on measures involving jail sentences of six months to three years for people in possession of or consuming gutkha and paan masala has also served the stock well. The measure is seen as a boost for consumption of cigarettes as consumers of the banned products may switch to smoking to quench pangs for intoxication.

Late last month, ITC announced modest quarterly as well as full year's results. For FY 2002-03, ITC registered a net profit growth of 15% to Rs 1,371.35 crore on an increase in net top line by 16% to Rs 5,865.78 crore.

For the fourth quarter ended 31 March 2003, ITC posted a 13% growth in bottom line to Rs 323.42 crore on a 10% growth in top line to Rs 1,519.86 crore.

The cigarettes business continues to be ITC's mainstay, accounting for 75% of its revenues (in FY 2002-03). But the company is diversifying into a number of other segments. It has recently forayed into lifestyle and food ventures. ITC has also entered other businesses like atta (flour), biscuits and confectionery. The company also merged its paper and paperboard unit ITC Bhadrachalam Paperboards with itself.

The Union Budget for 2003-04 came as a relief to ITC what with the absence of the customary hike in excise duty on tobacco products. ITC is a dominant player in the cigarettes segment, with a 66% market share.