Cigarette stocks rebound sharply as price hikes and block deals revive sentiment
Cigarette and tobacco stocks staged a strong rebound in Friday’s session, with shares of major players such as ITC and Godfrey Phillips India rising sharply after a period of underperformance. The renewed buying interest follows recent price hikes, supportive brokerage commentary, block deals at premium prices and resilient earnings from key companies.
ITC shares rose nearly 6% to around ₹327.7, snapping a two-day losing streak. Godfrey Phillips India climbed as much as 13% to about ₹2,229.5, making it one of the top gainers in the segment. The move comes after cigarette stocks corrected significantly in January following the announcement of higher excise duties.
Market participants say the latest rally reflects a reassessment of the sector’s pricing power and demand resilience despite higher taxation.
Broker optimism adds to the narrative that “worst is behind”
A recent note from brokerage Nuvama, as cited by NDTV Profit, said the “worst is behind” for cigarette stocks. The brokerage expects companies to take staggered price hikes in the coming months to offset tax increases.
According to the report, Nuvama does not anticipate any significant tax hikes in the next two years, offering medium-term visibility to the sector. It also described cigarette stocks as being in a heavily sold zone with relatively comfortable valuations.
“Cigarette prices have increased sharply, showing pricing power,” the brokerage said, adding that volumes may not see a double-digit decline next year.
Such commentary appears to have encouraged value-oriented investors to revisit the space.
Block deals in ITC signal institutional interest
ITC also saw notable block deal activity, which often draws market attention as a sign of institutional participation. Data showed over 1.3 crore shares changing hands via block deals at an average price of about ₹321.8 per share.
This represented roughly a 4% premium to the previous closing price of ₹310.2. Trades at a premium are frequently interpreted as a sign of buyer confidence, though the identities and long-term intentions of participants are not always disclosed immediately.
High volumes accompanied the move, with ITC seeing significant turnover on the NSE during the session.
Recent correction sets the stage for value buying
Another factor behind the rally is value buying after a steep correction earlier in the year. In January, ITC, Godfrey Phillips India and VST Industries had declined about 20.1%, 26.3% and 8.9%, respectively.
The selloff had followed the notification of higher duties on cigarettes and tobacco products. Some investors now appear to be viewing those declines as overdone relative to the sector’s historical ability to pass on costs.
Value buying typically emerges when long-term investors see price corrections as disconnecting from fundamentals.
Price hikes following new excise regime improve revenue visibility
The government’s new excise duty regime has materially raised costs for cigarette makers, but it has also led to price increases at the retail level.
Parliament approved the Central Excise (Amendment) Bill, 2025, paving the way for higher duties on cigarettes and tobacco products. The new structure replaces a temporary levy and adds excise duty on top of the existing 40% GST.
According to a finance ministry notification effective February 1, excise duty ranges from ₹2,050 to ₹8,500 per 1,000 sticks depending on cigarette length.
Analysts at ICICI Securities estimate this translates into a 22–28% increase in overall costs for 75–85 mm cigarettes. Distributors say premium cigarettes of 76 mm length could see price increases of ₹50–55 per pack of 10 sticks, depending on the brand.
While companies have yet to formally announce revised maximum retail prices, the expectation of higher realizations appears to be supporting stock prices.
Strong quarterly results provide additional support
Recent earnings from leading players have also helped sentiment.
ITC reported a 6.4% year-on-year rise in net profit to ₹5,087.87 crore for the October–December quarter of FY26. Revenue from operations rose about 6.66% to ₹21,706.64 crore.
Godfrey Phillips India posted a consolidated net profit of ₹343.29 crore for Q3 FY26, up 9% year-on-year. Revenue from operations grew around 16% to ₹2,189.93 crore.
Godfrey Phillips markets brands such as Four Square, Red and White and Cavanders, and manufactures Marlboro in India under a license from Philip Morris. Its stock move also comes ahead of results from its promoter Philip Morris, which investors often track for global cues.
Here’s what happened today and why traders reacted
Friday’s session saw cigarette stocks outperform the broader market as multiple triggers aligned.
Traders reacted to:
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Brokerage commentary suggesting downside risks have eased
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Block deals in ITC at premium prices
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Recent price hikes following tax changes
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Strong quarterly earnings
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Value buying after January’s correction
Together, these factors created a positive short-term narrative for the sector.
What this means for investors assessing the sector
For investors, cigarette stocks remain a complex mix of defensive demand, regulatory risk and pricing power. Historically, the sector has shown an ability to pass on tax increases, but volume elasticity remains a key variable.
Key considerations for portfolios:
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Pricing power supports margins but may test demand
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Regulatory and tax risks remain structural
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Valuations have corrected from recent highs
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Stocks can be sensitive to policy headlines
Short-term momentum may continue if volumes hold up and further tax surprises are avoided. However, long-term investors often track regulatory signals and consumption trends closely.
In the coming sessions, the sustainability of the rally will likely depend on confirmation of price hikes, volume trends and broader market sentiment. For now, cigarette stocks have reminded the market that even heavily taxed sectors can attract buying when valuations and earnings align.
