ITC Shares Extend Sharp Selloff as Excise Duty Hike Triggers Heavy Liquidation
Shares of ITC fell more than 2 percent on January 6, extending a steep decline to nearly 15 percent in just four trading sessions. The stock slipped to a fresh 52-week low of ₹337.75 before recovering marginally to close at ₹343.25. The sharp fall has erased close to ₹82,000 crore in market capitalisation over four days, marking one of the most aggressive selloffs seen in the stock in recent years.
The sustained weakness comes after the government cleared a sharp hike in cigarette excise duties, triggering fears of margin pressure, price-led volume contraction, and earnings downgrade risks. Despite ITC’s reputation as a defensive, dividend-paying stock, bearish momentum has dominated near-term sentiment.
New Cigarette Excise Duty Sparks Market Anxiety
The key trigger behind the fall was the approval of the Central Excise (Amendment) Bill, 2025 by Parliament in December. The move replaces a temporary levy with a permanent excise duty on cigarettes and tobacco products, imposed over and above the existing 40 percent GST.
The finance ministry has notified excise duties ranging between ₹2,050 and ₹8,500 per 1,000 sticks, depending on cigarette length, effective February 1. Analysts at ICICI Securities estimate this translates into a 22–28 percent increase in overall costs for cigarettes in the 75–85 mm category.
“Cigarettes longer than 75 mm account for roughly 16 percent of ITC’s volumes and are likely to see price increases of ₹2–3 per stick as a result of the levy,” ICICI Securities said, adding that the extent of volume elasticity will be crucial to watch.
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Dividend Comfort Collides With Regulatory Risk
ITC has long been viewed as a safe haven stock due to its consistent dividend payouts. In FY25, the company declared a total dividend of ₹14.35 per share, translating into a dividend yield of about 4.10 percent as of January 6, 2026.
However, analysts caution that while dividends offer downside comfort, regulatory shocks to the core cigarette business can overwhelm income-led buying in the short term. The cigarette segment remains ITC’s biggest profit contributor, and any sustained hit to volumes or margins could limit future cash flow flexibility.
Technical Charts Signal Heavy Damage, Key Levels in Focus
From a technical perspective, analysts say the stock remains under pressure. Siddharth Maurya, Founder and Managing Director at Vibhavangal Anukulakara, said ITC is trading below all crucial moving averages, keeping bearish momentum intact.
“The initial support is placed near ₹328, while resistance is seen around ₹388–390. A close above resistance could trigger a recovery phase, but a decisive break below ₹328 may intensify the negative trend,” Maurya said.
The stock’s failure to hold long-term support zones has dented near-term technical confidence, even as oversold indicators start flashing.
Capitulation Signals Emerge as Volumes Surge
Some market experts believe the ferocity of the selloff could signal exhaustion rather than the start of a prolonged downtrend. Darshan Rathod, Director and COO of Multyfi, said ITC’s collapse after the cigarette tax hike triggered “one of the most violent single-day liquidations in recent memory”.
“Volumes surged to nearly 30 times the daily average, a classic capitulation signature that often marks exhaustion bottoms rather than sustained declines,” Rathod said.
He added that the breach of the ₹375–380 multi-year support and the plunge to ₹342 has pushed the stock about 15 percent below its 200-day SMA, marking the deepest oversold condition since the COVID crash.
Derivatives Data Suggests Market May Be Overcrowded on Shorts
Rathod highlighted that while call writing at ₹350 reflects near-term bearishness, the derivatives setup presents a more nuanced picture. “The Put/Call ratio at 0.61 and heavy put accumulation at ₹340–330 strikes suggest smart money may be building safety nets rather than chasing further downside,” he said.
According to him, ₹340 is the immediate pivot level. A recovery above ₹360 with normalising volumes could confirm stabilisation, while sustained trade below ₹335 may open the door to ₹310–300 levels. A true trend reversal, however, would require the stock to reclaim ₹400 decisively.
Bearish Camp Advises Caution Despite Oversold Signals
Not all analysts are convinced a bottom is in place. Drumil Vithlani, Technical Research Analyst at Bonanza, warned that downside momentum could continue.
“The stock is in a clear downtrend and is trading below all major EMAs of 20, 50, 100 and 200. The RSI at 22.96 indicates oversold conditions, but oversold does not automatically mean reversal,” he said.
Vithlani added that the earlier support near ₹380 has now turned into a strong resistance zone, while the next major support lies near ₹310. He advised investors to avoid fresh entries until clearer signs of trend stabilisation emerge.
Broker Downgrade Adds to Pressure
Adding to the cautious outlook, Macquarie has downgraded ITC to ‘Neutral’ from ‘Buy’ and slashed its target price by 34 percent to ₹330, implying further downside from recent levels. The downgrade reflects concerns over earnings visibility and regulatory overhang following the excise hike.
Bottoming Out or Value Trap? What Investors Should Watch
Analysts agree that ITC is at a critical juncture. While dividend yield and oversold technicals offer comfort to long-term investors, near-term risks remain elevated due to regulatory uncertainty and fragile sentiment.
Key factors to track going forward include:
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Pricing actions and volume response after February 1
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Management commentary on margin protection
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Technical behaviour around ₹340–330 support zone
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Institutional activity and derivatives positioning
As one market expert summed up, “ITC’s long-term franchise strength is intact, but the stock needs time to absorb the regulatory shock. Catching the exact bottom may be difficult, and patience will be key.”
For now, the once-stable dividend favourite finds itself navigating one of its most testing phases in recent memory.
