ITC Hotels Excluded from BSE Indices and Sensex Following Trading Performance on February 2025
5 Dariya News
06-Feb-2025
Effective February 5, 2025, ITC Hotels Ltd has been removed from the Bombay Stock Exchange (BSE) indices, including the prestigious Sensex, in a major decision that shook the entire stock market. The move comes at a time when the company's trading performance has been poor since its debut on January 29, 2025. The exclusion has drawn attention to the unpredictability and difficulties experienced by recently listed companies.
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Background of ITC Hotels
ITC Hotels was established with a special focus on the hotel sector and was a separate subsidiary of the ITC Group. While catering to its own market characteristics through distinct operations and growth plans, the division attempted to uncover value for shareholders. To ease portfolio rebalancing for passive funds, which usually follow certain indices, ITC Hotels was first listed on important indices.
Reasons for Exclusion
ITC Hotels' inability to reach the lower circuit limit before the specified cut-off time of 2 pm on February 4, 2025 is the main reason for its removal from the BSE indices. This failure led to its immediate removal from all indices before the commencement of trading on February 5, BSE said in a statement. ITC Hotels stock had been underperforming since its launch and closed 4.16% down on the day, reflecting the larger trend of declining confidence in the market.
Market Reaction and Financial Implications
This exclusion had significant immediate consequences, leading index trackers to sell shares worth over ₹400 crore. With ITC Hotels being removed from the National Stock Exchange's (NSE) Nifty index, analysts estimate that the selling pressure will increase by an additional ₹700 crore. This massive sell-off reflects the difficulties recently listed firms face in maintaining their market position and signals a serious drop in investor confidence.
When ITC Hotels shares first went on sale, they were valued at ₹188 on the BSE and ₹180 on the NSE. However, the market capitalization fell from nearly ₹39,000 crores to around ₹34,266 crore after less than a week of trading in February. Volatility has been a defining feature of the stock’s success; it peaked at ₹189 soon after listing and fell to ₹161.05 a few days later.
Implications for Investors
The exclusion of ITC Hotels from major indices has raised several concerns among investors. Institutional investors are revising their portfolios in response to this change, the immediate impact of which is likely to be a reduction in liquidity and an increase in volatility. This scenario also serves as a warning against investing in recently listed businesses that may not have any established track record of success or stable markets.
Yet some experts are upbeat about ITC Hotels' long-term prospects despite these headwinds. With minimal new capacity entering the market and growing consumer demand for upscale lodging, the hotel sector is well-positioned to recover from the pandemic. Similarly, it is anticipated that ITC Ltd., which still holds 40% of its legacy hotel segment, will continue to promote and control the brand.
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