ITC's climb to all-time high shows Indian investors searching for stability

ITC's climb has accelerated this month, as Hindenburg Research's allegations against the Adani Group has made Adani Enterprises and Adani Ports & Special Economic Zone the index's worst performers

Shares of Indian conglomerate ITC Ltd. have climbed to a record high, demonstrating investors may be starting to focus on stability in a market churning with concerns over corporate governance.

It’s the best-performing stock in the NSE Nifty 50 Index with a 15% gain this year, pushing its market value to nearly $57 billion. Its climb has accelerated this month, as US short seller Hindenburg Research’s allegations against the Adani Group has made Adani Enterprises Ltd. and Adani Ports & Special Economic Zone Ltd. the index’s worst performers.

“ITC’s stable cash flow and dividends have won hearts of investors in this volatile environment amid Adani's troubles and inflation,” said Sameer Kalra, founder of Target Investing in Mumbai. “The company is also expected to unlock value its non-cigarette businesses.”

ITC — whose operations range from tobacco to food and hotels — has one of the highest dividend yields and returns-on-equity among Nifty members. It also ranks top in a Bloomberg Economics analysis of governance, liquidity and leverage at Indian conglomerates. Tech Mahindra Ltd., a software services provider with similar characteristics to ITC, is the Nifty’s second-best gainer year to date.

India investors are increasingly drawn to stable returns. Dividend yield has been the top-performing strategy for a long-short portfolio of the nation’s blue chips this year, while price-target changes and earnings revisions rank top over 10 years, according to data compiled by Bloomberg.

Amid this search for stability, ITC’s gains have been pronounced, driving the stock up more than 75% in the past year. The surge in investor attention marks a big change with a couple years ago, when social-media memes lampooned the company’s stock as boring after years of stagnation and scrutiny of global tobacco businesses. 

ITC has gotten a further boost from stronger-than-expected third-quarter earnings due to better performance in its cigarette business and a recovery in its hotels segment.