Why is ITC Ltd. falling/rising?

Recent Price Movement and Market Context

On 16 January, ITC Ltd. hit a new 52-week low of ₹328.6, with the stock price closing at ₹329.25, down ₹5.5 or 1.64% from the previous session. This decline is consistent with the stock’s broader downward trajectory over recent months. Over the past week, ITC has lost 2.33% in value, significantly underperforming the Sensex, which remained almost flat with a marginal decline of 0.01%. The trend is more pronounced over longer periods: the stock has declined by 18.04% in the last month and 18.30% year-to-date, while the Sensex has only fallen by 1.31% and 1.94% respectively in these periods. Over the last year, ITC’s stock has dropped sharply by 23.93%, contrasting with the Sensex’s robust 8.47% gain.

ITC’s relative weakness is further highlighted by its modest 5.51% gain over three years, which pales in comparison to the Sensex’s 39.07% rise during the same timeframe. Even over five years, ITC’s 59.74% appreciation trails the benchmark’s 70.43% advance, underscoring a pattern of underperformance against broader market indices.

Technical Indicators and Trading Activity

From a technical standpoint, ITC is trading below all key moving averages, including the 5-day, 20-day, 50-day, 100-day, and 200-day averages, signalling a bearish trend. This persistent weakness in price momentum suggests limited near-term buying interest. Investor participation has also waned, with delivery volumes on 14 January falling by nearly 50% compared to the five-day average, indicating reduced conviction among traders. Despite this, liquidity remains adequate, with the stock able to support trades worth approximately ₹18.3 crores based on recent average volumes.

Fundamental Strengths Amidst Price Weakness

Despite the recent price decline, ITC Ltd. maintains strong long-term fundamentals. The company boasts an average Return on Equity (ROE) of 27.82%, reflecting efficient capital utilisation. Net sales have grown at a healthy compound annual growth rate of 10.71%, and the company carries virtually no debt, with an average debt-to-equity ratio of zero. These factors contribute to a solid financial foundation.

Moreover, ITC’s current ROE of 33.4 and a Price to Book Value ratio of 5.8 suggest the stock is fairly valued relative to its historical peer group. The company’s profits have increased by 18% over the past year, even as the stock price declined by nearly 24%. The PEG ratio of 1 indicates that the stock’s valuation is in line with its earnings growth, which should theoretically support investor confidence.

Institutional investors hold a significant 84.83% stake in ITC, signalling confidence from well-resourced market participants who typically conduct thorough fundamental analysis. This high institutional ownership often provides a stabilising influence on the stock price.

Challenges Weighing on Investor Sentiment

Nonetheless, several factors have contributed to the stock’s recent underperformance. The company reported flat results in the September 2025 quarter, which disappointed market expectations. The dividend payout ratio (DPR) is relatively low at 51.68%, potentially dampening appeal for income-focused investors. Additionally, the debtors turnover ratio for the half-year period stands at 12.97 times, the lowest among its peers, indicating slower collection efficiency that could impact cash flows.

ITC’s stock has consistently lagged behind the BSE500 index over the last three years, one year, and three months, reflecting below-par performance both in the long and short term. This persistent underperformance has likely eroded investor confidence, contributing to the recent price declines and subdued trading volumes.

Conclusion: Why ITC Is Falling

In summary, ITC Ltd.’s share price decline as of 16 January is primarily driven by its sustained underperformance relative to the broader market and sector benchmarks, coupled with disappointing recent financial results and weakening investor participation. While the company’s strong fundamentals and fair valuation provide a solid base, the lack of near-term catalysts and below-par operational metrics have weighed heavily on sentiment. The stock’s technical weakness and falling volumes further exacerbate the downward pressure, signalling cautiousness among investors.

For investors, the current scenario suggests a need to carefully weigh ITC’s long-term strengths against its recent challenges and market dynamics before considering fresh exposure.

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