ITC Drags Markets Lower as BAT Offloads Stake in Block Deal

Indian benchmark indices Sensex and Nifty 50 closed in the red on Wednesday, May 28, 2025, primarily dragged down by a significant sell-off in ITC shares after British American Tobacco (BAT) offloaded a substantial stake, influencing broader market sentiment amid profit booking and caution ahead of F&O expiry.

The Indian stock market witnessed a volatile session today, ultimately succumbing to selling pressure. The BSE Sensex settled 239.31 points, or 0.29%, lower at 81,312.32. Similarly, the NSE Nifty 50 index declined by 73.75 points, or 0.30%, to close at 24,752.45. The market’s downturn was significantly influenced by heavyweight ITC, which saw considerable selling pressure following a large stake sale by one of its key shareholders.

BAT’s Stake Sale Jolts ITC Share Price

The day’s major headline was the block deal executed by British American Tobacco (BAT), which offloaded approximately 2.6% of its equity in ITC Ltd. The transaction was reportedly valued at around ₹15,000 crore. This substantial supply of shares in the market led to a sharp decline in ITC’s stock price.

ITC shares were among the top losers on the Nifty 50. The stock crashed, closing at ₹420.10 on the NSE, a fall of 3.18% from its previous close. The Economic Times reported that ITC’s 2.6% equity changed hands in block deals early in the trading session. The news of BAT, ITC’s largest single shareholder, paring its stake spooked investors, leading to increased selling volume throughout the day.

The divestment by BAT is a significant event for ITC, potentially altering its shareholding structure and, as some analysts suggest, could remove an overhang on the stock. However, the immediate impact was negative due to the sheer size of the transaction.

Sectoral Impact and Market Breadth

The ripple effect of ITC’s fall was most pronounced in the FMCG sector. The Nifty FMCG index emerged as the top sectoral laggard, ending the day down by 1.49%. Consumer stocks, in general, were the biggest drag on the benchmark indices. Besides ITC, other FMCG majors like Nestlé India also faced selling pressure, with its shares declining 1.78% to ₹2,418.45.

Despite the headline indices closing lower, the broader market showed a mixed picture. The Nifty Midcap 100 ended marginally lower by 0.02%, while the Nifty Smallcap 100 managed to eke out a gain of 0.33%, indicating some resilience in the smaller segments of the market. However, on the BSE, the MidCap index ended 0.3% lower, and the SmallCap index was up 0.5%.

Market breadth on the NSE was somewhat balanced, though leaning slightly towards advancers earlier in the day, it closed with a more mixed feel. Out of 2,940 stocks traded on the NSE, 1,462 advanced while 1,395 declined, and 83 remained unchanged by mid-afternoon, though closing figures might show a slight shift.

Other notable losers that contributed to the market decline included IndusInd Bank, which dropped 1.99% to ₹804.75, and UltraTech Cement, which slipped 1.62% to ₹11,236.55. Apollo Hospitals also featured among the top Nifty losers, falling around 1.8%.

On the gaining side, HDFC Life rose by 1.5%, and Bajaj Finance managed to climb 1.07% to ₹9,270.80, providing some support to the market.

Catalysts: Profit Booking and F&O Expiry Jitters

Several factors contributed to Wednesday’s market decline. Analysts pointed to profit booking as a primary driver, especially with markets having seen a good run-up recently and valuations appearing rich in certain pockets. The large block deal in ITC acted as a catalyst for broader fund outflows.

Additionally, increased activity in the primary market and caution ahead of the monthly Futures & Options (F&O) expiry on Thursday also played a role in paring investor exposure. “The correction wasn’t about panic, it was classic pre-election nervousness and profit booking,” noted Value Research in its market commentary. “Large block deals, such as BAT’s ITC sale, tend to spook the market, especially when valuations are already rich.”

The India VIX, a measure of market volatility, ended lower by 2.79% at 18.02 points, suggesting that while there was a downturn, widespread panic was not evident.

Expert Remarks and Investor Outlook

Experts suggest that while large block deals can cause short-term disruptions, the underlying fundamentals of the market and specific stocks should be the primary focus for long-term investors. The BAT stake sale in ITC, while impacting the stock negatively today, might be seen by some as a long-term positive if it leads to a more diversified and less concentrated shareholding.

Retail investors are advised to remain cautious in the face of such large institutional trades and avoid making hasty decisions. The market is also navigating global cues and domestic macroeconomic data releases, which could influence trends in the near term.

What to Watch Next

Investors will be keenly watching the following:

• F&O Expiry: The monthly derivatives expiry scheduled for Thursday, May 29, is likely to keep markets volatile.
• ITC Share Price Movement: How ITC’s stock behaves in the aftermath of the block deal will be crucial. Key support and resistance levels will be tested.
• FII/DII Activity: Institutional flows, especially in response to the block deal and overall market conditions, will be monitored.
• Global Cues: International market trends and macroeconomic data releases from major economies will continue to have an impact.
• Nifty Technical Levels: The Nifty 50 has slipped below the psychological 24,800 mark. Its ability to reclaim and sustain above this level will be important. Support levels are seen around 24,500.

The market’s reaction in the coming days will provide further clarity on whether this is a temporary blip or the beginning of a more sustained correction.

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Disclaimer: This article is for informational purposes only and does not constitute financial advice. Always do your own research before investing.

Sources: The Economic Times: “Stock Market Highlight | Closing Bell: Sensex settles 240 pts lower, Nifty below 24,800; IndusInd Bank, UltraTech Cement drop 2% each” (May 28, 2025) Value Research: “Sensex ends 240 pts lower, Nifty slips below 24,800 due to ITC fall” (May 28, 2025) Business Standard: “Stock market close highlights: Sensex sheds 239 pts, Nifty at 24,752; FMCG drags; PSBs outperform” (May 28, 2025) Mint: “Breakout stocks to buy or sell: Sumeet Bagadia recommends five shares to buy today — 28 May 2025” (May 28, 2025) - Used for Nifty support level context from search result. Equitymaster: “Sensex Today Ends 220 Points Lower” (May 28, 2025) - Used for BSE broader market context from search result. The Hindu Business Line: “NSE/BSE Top Gainers & Losers Today 28 May 2025: Bajaj Finance, ITC, IndusInd Bank in focus” (May 28, 2025) - Used for specific closing prices and percentages for ITC and other stocks from search result.