The second round of price increases follows February’s excise duty shock; King Size retail price moves from ₹17 to ₹24 per stick; volumes already down 20% in April per NDTV Profit
Shares of ITC and Godfrey Phillips India surged up to 7% on April 29, 2026, after media reports indicated cigarette manufacturers are implementing a fresh round of price hikes of approximately 17%, the second pricing action since the Union Budget 2026 imposed a steep excise duty hike effective February 1. The rally builds on an earlier surge: UBS distributor channel checks had already confirmed that companies were implementing hikes across key segments, with the 84 mm King Size category seeing prices move from ₹17 to ₹24 per stick, a 41% increase, while the 64 mm segment rose from ₹5.90 to ₹7 per stick.
The Background: Budget 2026 Excise Shock
Union Budget 2026 delivered a major overhaul of India’s tobacco tax regime. Finance Minister Nirmala Sitharaman introduced a new excise duty and Health and National Security Cess effective February 1, 2026, replacing the old compensation cess and pushing cigarette prices up by ₹25 to ₹55 per pack. The excise duty ranges from ₹2,050 to ₹8,500 per thousand sticks depending on cigarette length, on top of the existing 40% GST slab.
The market’s immediate reaction was severe. Following the tax hike announcement, ITC shares fell 17.55% to ₹300 levels, making it the worst-hit Nifty 50 stock. Godfrey Phillips and VST Industries also saw double-digit declines.
Price Hikes: The First Round
The first wave of relief came in February when media reports confirmed cigarette makers had undertaken price hikes of 20–40% to pass on the excise duty burden. ITC’s Gold Flake and Classic Premium prices rose 41%, Classic Connect Slim prices were cut 20% to protect volumes, and Gold Flake Superstar in the value segment rose approximately 19%. Godfrey Phillips raised the price of Marlboro Compact from ₹9.50 to ₹11.50 per stick.
UBS maintained a Buy rating on ITC with a target price of ₹395, implying approximately 21% upside from the ₹325 level at the time, with the brokerage concluding that price hikes would have limited negative impact on volumes and EBIT.
The Volume Problem: April Data Is Sobering
The April 29 rally comes against a difficult volume backdrop. Overall cigarette sales volumes dropped approximately 20% in April 2026, per an NDTV Profit report, with the premium king-size segment registering the sharpest contraction.
King-size cigarettes, including ITC’s Classic and Gold Flake Kings and Godfrey Phillips’ Marlboro, account for over 30% of revenue for both companies and carry the highest margins, with ITC’s overall cigarette EBIT margin reported at up to 70%. The consumer response has been textbook price elasticity: a significant portion of the king-size consumer base has migrated to shorter-length, lower-priced alternatives, a downtrading dynamic that compresses both revenue and margin per unit.
Why the Rally Still Makes Sense
Vinod Nair, Head of Research at Geojit Investments, said pricing adjustments now in place make near-term margin pressures more manageable. “December-quarter results indicate that the earlier weakness was largely tax-driven rather than reflective of any structural slowdown in demand. While higher retail prices could temporarily weigh on volumes, cigarette companies have historically displayed strong pricing power, allowing them to protect profitability even in elevated tax regimes,” Nair said.
ITC’s premium variants have seen hikes of approximately 40%, while mid- and value categories witnessed increases of 19–20%. Estimates suggest nearly 50% of ITC’s portfolio may see price hikes exceeding original expectations, resulting in higher EBIT per stick that offsets the excise burden.
Stock Levels and Targets
ITC’s share price was at ₹303.85 as of April 27, 2026, with a 52-week high of ₹444.20 and a 52-week low of ₹287. Market capitalisation stands at ₹3,80,707 crore. The April 29 rally of up to 7% pushes the stock closer to the ₹325 range.
Ravi Singh, Chief Research Officer at Mastertrust, said ITC could extend its move toward ₹340, advising a stop-loss at ₹300. For Godfrey Phillips, he sees potential to ₹2,350–₹2,400, recommending a stop loss at ₹2,000.
The April 29 rally is rational but fragile. A 17% further price hike protects per-unit margin economics, but with volumes already 20% below year-ago levels in April, the Q4 FY26 results due in May will determine whether this pricing resilience is translating into earnings resilience.
Also Read: Canara HSBC Life Insurance Q4 FY26: Profit Up 9% to ₹35 Cr, Shares Jump 10%
Frequently Asked Questions
Q1. Why are ITC and Godfrey Phillips shares rising today, April 29, 2026?
ITC and Godfrey Phillips shares rallied up to 7% on April 29, 2026, after media reports indicated cigarette manufacturers are implementing a fresh 17% round of price hikes, the second pricing action since the Union Budget 2026 imposed excise duty effective February 1st. Investors view the hike as evidence of pricing power that protects per-unit margins despite volume pressure.
Q2. What is the new cigarette price hike in India in 2026?
The Union Budget 2026 introduced excise duty of ₹2,050–₹8,500 per thousand sticks effective February 1, pushing retail prices up ₹25–₹55 per pack. Companies responded with 20–40% price hikes: ITC’s Gold Flake and Classic Premium rose 41%, and Godfrey Phillips raised Marlboro Compact from ₹9.50 to ₹11.50 per stick. A fresh 17% second round was reported on April 29, 2026.
Q3. How much have cigarette volumes fallen after the excise duty hike in India?
Overall cigarette sales volumes dropped approximately 20% in April 2026, per an NDTV Profit report, with the premium King Size segment hit the hardest. King size, including ITC’s Classic and Gold Flake Kings and Godfrey Phillips’ Marlboro, accounts for over 30% of revenue for both companies and carries ITC’s highest EBIT margins of up to 70%.
Q4. What is ITC’s share price target after the cigarette price hike in 2026?
Ravi Singh, Chief Research Officer at Mastertrust, sees ITC extending toward ₹340 with a stop-loss at ₹300. UBS has a Buy rating on ITC with a target price of ₹395, approximately 21% upside from the ₹325 level. ITC’s 52-week high is ₹444.20, and its market capitalisation stands at ₹3,80,707 crore as of April 27, 2026.
Q5. Should I buy ITC or Godfrey Phillips shares after the April 2026 cigarette price hike?
Analysts are cautiously positive. Vinod Nair of Geojit Investments notes the earlier weakness was tax-driven, not a structural demand collapse, and that cigarette companies have historically protected profitability through pricing power. However, with April volumes already down 20% and Q4 FY26 results due in May, investors should wait for earnings confirmation before adding fresh positions. Mastertrust recommends stop-losses at ₹300 for ITC and ₹2,000 for Godfrey Phillips.
