ITC share price down 1% in strong market; why is the FMCG stock falling?

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ITC share price today

 

ITC share price slipped 1.4 per cent to ₹398.50 on the National Stock Exchange (NSE) in Monday's intraday trade, in an otherwise strong market.

 

At 09:23 AM, ITC shares were trading 1 per cent lower at ₹399.80, as compared to a 0.32-per cent rise in the Nifty 50. The stock price of the diversified fast-moving consumer goods (FMCG) giant had hit a 52-week low of ₹390.15 on April 7, 2025.

 

Notably, ITC shares have underperformed the market by falling 5 per cent in the past one month, as against a 2.2 per cent rise in the Nifty 50. Thus far in calendar year 2025, ITC's market price has declined by 17 per cent, as compared to a 9-per cent rally in the benchmark index.

 

Why is ITC stock down today?

 

ITC is one of the largest consumer companies in India with a diversified presence in FMCG, hotels, packaging, paperboards & specialty papers, and agri-business. Though the cigarettes division is still the major source of revenue, other businesses – FMCG, agri, paper and hotel – have grown significantly over the years.

 

According to reports, the government is expected to introduce two bills in the Lok Sabha today, which are likely to replace the goods and services tax, or GST compensation cess on tobacco products like cigarettes and pan masala.

 

The Central Excise Amendment Bill, 2025, and The Health Security se National Security Cess Bill, 2025, are listed for introduction in Parliament.

 

The government currently levies a compensation cess on top of a 28 per cent GST on tobacco and pan masala. Notably, the compensation cess regime is set to end soon.

 

The Centre's move is necessary because the GST compensation cess on such products is ending soon and the GST Council has authorised the finance minister to find a mechanism to tax demerit goods.

 

There would not be any change in the existing levy imposed on such demerit goods under the compensation-cess mechanism, Business Standard reported quoting official sources.

 

Currently, the government levies a compensation cess on top of the 28-per cent GST on tobacco products, which together leads to 50-55 per cent tax on cigarettes. In GST 2.0 reform, GST rate on cigarettes has been increased to 40 per cent from 28 per cent earlier.

 

"With the introduction of the new Bill, the existing cess rate will be replaced with the new cess rates. Government, in its earlier comments, indicated that the introduction in the new cess Bill will not have any major changes in the tax rate. Hence the introduction of the new cess Bill is likely to be tax neutral for ITC and other cigarette manufacturing companies," ICICI Securities said in a note.

 

ITC has sustained its market leadership in the cigarettes space and delivered decent performance (both top line and profitability) amid heavy taxation burden. Analysts at Nuvama Institutional Equities, in their Q2 result update, said they expect ITC's cigarette earnings before interest and tax (Ebit) growth to remain resilient and FMCG's profitability surge to sustain.

 

"High incidence of taxation and strict regulatory norms on cigarette usage in public and packaging pose threats to cigarette volume growth and growing contraband market of cigarettes also poses a significant threat to the cigarettes business are key risks," the brokerage firm said with a 'Buy' rating and a share price target of ₹534.   

 

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