Significance of Nifty 50 Membership for ITC Ltd
As a constituent of the Nifty 50, ITC Ltd holds a pivotal role in India’s benchmark equity index, representing the FMCG sector’s influence on the broader market. This membership ensures substantial institutional interest and liquidity, as many passive funds and ETFs track the index, mandating investment in ITC shares. The company’s market capitalisation of approximately ₹3,97,928.33 crores solidifies its position as a large-cap heavyweight, making it a key barometer for FMCG sector health and investor confidence.
However, the weight of index inclusion also brings heightened scrutiny. ITC’s recent stock performance, which has lagged the Sensex by a significant margin over multiple time frames, has raised concerns among investors. Over the past year, ITC’s share price has declined by 30.07%, contrasting sharply with the Sensex’s 8.79% gain. This divergence highlights challenges specific to ITC and the cigarettes/tobacco sector, despite the broader market’s resilience.
Institutional Holding Changes and Market Sentiment
Institutional investors have been recalibrating their exposure to ITC amid these headwinds. The company’s Mojo Score currently stands at 48.0, with a recent downgrade from a Hold to a Sell rating on 29 December 2025. This downgrade reflects deteriorating fundamentals and subdued growth prospects relative to peers. The Market Cap Grade remains at 1, indicating that despite its size, ITC’s valuation and momentum metrics are under pressure.
On 3 February 2026, ITC’s stock showed a modest intraday gain of 0.89%, in line with sector performance, but this belies the broader trend of underperformance. The stock has gained 3.73% over the last two days, including a 2.02% gap-up opening today, touching an intraday high of ₹321.15. Yet, it remains below its 20-day, 50-day, 100-day, and 200-day moving averages, signalling a lack of sustained upward momentum.
The cigarettes/tobacco sector itself has been mixed, with 32 stocks having declared results recently: 12 positive, 12 flat, and 8 negative. ITC’s relative weakness within this cohort suggests company-specific challenges, including regulatory pressures and shifting consumer preferences, are weighing on investor confidence.
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Benchmark Status Impact on Investor Behaviour
ITC’s status as a benchmark stock means its performance influences sector and index fund flows. The stock’s underperformance relative to the Sensex—down 21.19% year-to-date versus the Sensex’s 1.46% decline—has prompted some institutional investors to reconsider allocations. This is particularly relevant given the stock’s price-to-earnings ratio of 16.31, slightly below the industry average of 16.68, indicating valuation pressures amid subdued earnings growth.
Over longer horizons, ITC’s returns have lagged significantly. Its three-year performance shows a decline of 11.76%, while the Sensex surged 38.02%. Even over five and ten years, ITC’s gains of 54.91% and 56.68% respectively pale in comparison to the Sensex’s 67.10% and 246.67% returns. This persistent underperformance has contributed to the recent downgrade in Mojo Grade and a more cautious stance from market participants.
Sector-wise, the cigarettes/tobacco segment has seen a mixed bag of results, with ITC’s challenges compounded by regulatory scrutiny and evolving consumer trends favouring healthier alternatives. The stock’s recent trading pattern—opening gap-up but failing to sustain above key moving averages—reflects investor uncertainty about near-term prospects.
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Outlook and Strategic Considerations for Investors
For investors, ITC Ltd’s current profile presents a complex picture. The company’s entrenched position in the FMCG sector and its large-cap status provide a degree of stability and liquidity. However, the downgrade to a Sell rating by MarketsMOJO, coupled with a Mojo Score of 48.0, signals caution. Investors should weigh the company’s valuation against its subdued earnings momentum and sector headwinds.
Institutional investors may continue to adjust holdings based on quarterly results and regulatory developments. The stock’s recent short-term gains could represent technical rebounds rather than a fundamental turnaround, given its failure to breach longer-term moving averages. The sector’s mixed results further underscore the need for selective stock picking within FMCG and tobacco.
Ultimately, ITC’s role as a Nifty 50 constituent ensures it remains a key focus for portfolio managers and index funds. However, its relative underperformance compared to the Sensex and peers suggests that investors should monitor developments closely and consider diversification within FMCG or alternative sectors to optimise returns.
Conclusion
ITC Ltd’s journey as a flagship FMCG stock within the Nifty 50 index is marked by significant challenges amid shifting market dynamics and institutional sentiment. While its large-cap stature and benchmark status guarantee continued investor attention, the recent downgrade and underwhelming price performance highlight the need for cautious appraisal. As the cigarettes/tobacco sector navigates regulatory and consumer preference changes, ITC’s ability to adapt will be critical to restoring investor confidence and regaining momentum in the broader market context.
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