Indian Shares Dip as ITC Weighs on Benchmarks

Overview

The Indian equity markets witnessed a decline on Tuesday, with benchmark indices Sensex and Nifty ending in the red. The primary drag came from FMCG major ITC, whose disappointing quarterly earnings sparked a sell-off in the counter, influencing broader investor sentiment. Coupled with weak global cues and cautious pre-election positioning, the mood on Dalal Street turned risk-averse.

Let’s dive into what led to this downward move, how ITC played a central role, and what market participants can expect in the coming sessions.

Benchmarks Under Pressure

The BSE Sensex shed over 300 points intraday before settling around 73,000, while the NSE Nifty 50 closed near the 22,150 mark, registering a near 0.4% decline. The broader market also followed suit with the Nifty Midcap 100 and Smallcap 100 both finishing marginally lower.

Notably, the sectoral landscape was mixed — while auto and pharma saw some defensive buying, FMCG and IT bore the brunt of selling. The VIX rose modestly, indicating heightened volatility ahead.

ITC's Disappointing Q4 Results: The Catalyst

Earnings Miss

ITC’s Q4 FY25 earnings report failed to live up to market expectations. The company posted a flat year-on-year growth in profit, which came in at ₹4,925 crore, missing analyst estimates of ₹5,100 crore. Revenue growth was also tepid, at just 2.3% YoY, amid slowing cigarette sales and weak performance in its hotel and paperboard segments.

Market Reaction

Post-results, ITC shares tanked over 4%, erasing nearly ₹20,000 crore in market capitalization in a single session. Given ITC’s heavy weightage in both the Nifty and Sensex, this had a significant impact on the headline indices.

The disappointment wasn’t just in the numbers — the management commentary on the cigarette business hinted at slowing volume growth and increased competition, sending alarm bells among investors.

Sectoral Snapshot

FMCG: ITC’s Fallout Spills Over

The entire FMCG pack took a hit post ITC’s results. Stocks like HUL, Britannia, and Dabur witnessed minor profit booking. Investors are growing wary of premium valuations in the sector amid softening rural demand and input cost volatility.

Information Technology: Profit Booking Continues

The IT index fell around 0.6%, with pressure seen in large-caps like Infosys and Wipro. Despite a recovery in US tech stocks overnight, the Indian IT sector continues to face valuation headwinds and macroeconomic uncertainty in its key export markets.

Auto & Pharma: Bright Spots

Auto stocks such as Tata Motors, Maruti Suzuki, and Bajaj Auto posted gains on strong sales figures and bullish broker upgrades. Pharma counters like Sun Pharma and Cipla also saw buying interest, suggesting a defensive rotation as markets turned choppy.

Global Cues & Macroeconomic Factors

Weak Asian Markets

Asian markets, including the Nikkei, Hang Seng, and Kospi, were largely down amid persistent concerns about China’s real estate crisis and weak manufacturing data out of Japan. This added to the cautious sentiment in India.

US Fed Minutes Eyed

Investors globally are awaiting the release of the latest FOMC minutes, which could offer clues into the timing of US interest rate cuts. With inflation still sticky, expectations of an early rate cut have been dialed back, hurting risk sentiment worldwide.

Crude Oil & INR Movement

Crude oil prices remained stable near $83 per barrel. However, a weakening rupee, which closed at ₹83.46 against the dollar, added pressure on oil-importing companies and dented foreign investor confidence.

FIIs & DIIs Activity

Foreign Institutional Investors (FIIs) were net sellers to the tune of ₹1,022 crore today, continuing their cautious stance amid election-related uncertainty and global volatility. In contrast, Domestic Institutional Investors (DIIs) were net buyers, absorbing part of the selling pressure with inflows worth ₹846 crore.

While DIIs have consistently supported markets, the selling by FIIs — especially in large-caps like ITC — weighed heavily on benchmarks.

Technical View: Key Levels to Watch

Nifty 50 formed a bearish candle on the daily chart and slipped below its 5-day moving average. Immediate support lies at 22,000, followed by a strong base near 21,850. On the upside, resistance is seen at 22,300 and 22,450.

Sensex needs to hold the 72,800 level to avoid further correction. A break below could trigger a deeper pullback toward 72,000.

Technical analysts suggest that while the medium-term trend remains bullish, near-term momentum is weakening. Traders are advised to remain cautious and avoid aggressive long positions till volatility subsides.

Market Sentiment: What Experts Say

Ajit Mishra, Religare Broking:
“ITC’s results were a disappointment and have shaken investor confidence in the FMCG sector temporarily. Add to that the nervousness around global macro events, and it’s a recipe for a short-term pullback.”

Nirali Shah, SAMCO Securities:
“Markets were overbought and ripe for a correction. ITC acted as the trigger, but the broader picture indicates consolidation ahead of election results. Investors should use dips to accumulate fundamentally strong names.”

Vinod Nair, Geojit Financial Services:
“FIIs remain cautious, and with earnings season underway, stock-specific action will dominate. We advise sticking to quality names with robust fundamentals and avoiding speculative bets.”

Upcoming Triggers

Here’s what traders and investors should keep an eye on for the rest of the week:

• FOMC Minutes (US): To assess interest rate trajectory

• GDP Data (India): Expected later this week – crucial for fiscal guidance

• Auto Sales (May): Updates from OEMs may influence auto stocks further

• Monsoon Progress: Any deviation in IMD’s forecast could impact agri-linked sectors

• Political Developments: Pre-election news flow can trigger sharp moves in select sectors

The Indian market’s dip today was a combination of ITC’s weak earnings, global risk-off sentiment, and technical resistance at higher levels. While the broader market remains resilient, large-caps like ITC can swing indices considerably due to their weightage.

For investors, this is a reminder that stock-specific developments can often override broader trends. While short-term volatility is likely to persist, the medium- to long-term India growth story remains intact.

As always, prudent risk management, diversified allocation, and staying updated with macro cues will be key to navigating the markets in this phase.