Dhanteras 2025 – ITC stock may prove to be non-cyclical in uncertain times

Year-to-date in 2025, ITC Ltd shares have gone down by 16.22%. But a large part of this decline is because the company demerged its hotels business into a separate listed entity, ITC Hotels, in January this year. ITC Hotels ltd stock has gained 26.33% year-to-date in 2025.

ITC stock has underperformed many other FMCG stocks this year

After the demerger of the hotel business, ITC shares have lost around 7% in 2025. Nifty 50 index has gained 7.76% in this period. So effectively, ITC’s stock has underperformed the Nifty 50 index by around 14%, till date in 2025. ITC is a constituent of Nifty FMCG index. It has currently the largest weight in this index, with 33.34% weight. Nifty FMCG index has lost 3.68% year-to-date in 2025. The performance of Nifty FMCG index this year was dragged down by the performance of ITC’s stock because of the heavy weight of ITC in the index. ITC is therefore also among the FMCG stocks that underperformed this year.

Dependence on cigarettes & tobacco business

ITC still is heavily dependent on its cigarette & tobacco business for its revenue and profits. 44% of the total revenue of the company currently comes from its cigarette & tobacco business. The cigarette business contributes around 70% to the profits of the company. In the new lower GST taxation regime, cigarettes continue to be taxed at 28% plus compensation cess, until GST compensation to states is paid off by the central government. After the compensation to states is paid off, cigarettes will move to the higher tax bracket of 40%. So the new GST structure did not benefit the cigarettes business of ITC. In fact, cigarettes may become even more expensive once they move to the 40% tax bracket. This explains why ITC shares did not rise, unlike many other FMCG stocks, after the lower GST rates were announced by the government.

ITC has a well-diversified business

ITC has a well-diversified business. Over the past few years it has successfully reduced its dependence on the cigarette business. Cigarettes once accounted for 80% of the revenues of the company.

More than 80% of ITC’s non-cigarette FMCG products have become cheaper under the new GST structure. Many have moved from the higher 12% tax bracket earlier to the 5% GST rate.

FMCG goods less cyclical

FMCG (Fast Moving Consumer Goods) stocks are less vulnerable to economic cycles. People continue to buy flour and chips and biscuits even during times of economic slowdown. Price elasticity of demand for FMCG goods tends to be lower than that of most other goods. That makes ITC and other FMCG stocks defensive plays. The current times are of high economic uncertainty. This uncertainty may prevail over the next one year too. Many investors may therefore choose to invest in ITC shares and shares of other FMCG companies.

If the economic uncertainty is reduced and economic recovery accelerates then also ITC may benefit. Demand for many of its FMCG products may go up in this scenario. ITC enjoys extensive distribution network across India, especially in the rural markets. This distribution network also gives it a competitive advantage.

The stock ended the day, today, 16^th October, up by 1.39% at Rs 405.45. It is currently trading at a Price-to-Earnings ratio of 15. This means that the stock at its current valuation is not very expensive. 52-week high price of the stock currently is Rs 498.85. 52-week low price of the stock is Rs 390.15.

Disclaimer : This content is only for informational purpose. It does not make any recommendation to act or invest.

Source: NSE, ITC