{"id":19350,"date":"2026-01-01T13:51:39","date_gmt":"2026-01-01T08:21:39","guid":{"rendered":"https:\/\/trending.niftytrader.in\/?p=19350"},"modified":"2026-01-01T13:51:39","modified_gmt":"2026-01-01T08:21:39","slug":"itc-shares-tumble-10-as-brokerage-flags-possible-15-cigarette-price-hike-after-new-excise-duty","status":"publish","type":"post","link":"https:\/\/www.niftytrader.in\/markets\/itc-shares-tumble-10-as-brokerage-flags-possible-15-cigarette-price-hike-after-new-excise-duty\/","title":{"rendered":"ITC Shares Tumble 10% As Brokerage Flags Possible 15% Cigarette Price Hike After New Excise Duty"},"content":{"rendered":"

ITC Shares Sink 10% as Fresh Excise Duty Rekindles Volume and Margin Concerns<\/p>\n

Shares of ITC witnessed a sharp sell-off on January 1, plunging nearly 10 percent and touching a near three-year low, after the government announced a steep increase in excise duty on cigarettes. The move rattled investors across the tobacco space, reviving long-standing concerns around volume contraction, pricing pressure, and the risk of consumers shifting to illicit products.<\/p>\n

The sell-off marked ITC\u2019s worst single-day decline since February 2022. Other tobacco stocks were also caught in the downdraft, with Godfrey Phillips India tumbling as much as 18 percent, while VST Industries fell over 5 percent during intraday trade.<\/p>\n

Government\u2019s Excise Duty Notification Triggers Sharp Market Reaction<\/h2>\n

Late on December 31, the finance ministry notified a fresh excise duty on cigarettes, effective February 1. The revised duty ranges from Rs 2,050 to Rs 8,500 per 1,000 sticks, depending on cigarette length. This comes at a time when the compensation cess regime under GST is nearing its sunset, prompting a recalibration of tobacco taxation.<\/p>\n

Brokerages were quick to flag the announcement as a negative surprise. Analysts at Jefferies termed the move \u201ca clear negative,\u201d warning that higher taxes would likely dent cigarette volumes and increase the risk of consumers migrating to the illicit market.<\/p>\n

\u201cThis will be a clear negative as volumes will be impacted and concerns would also re-emerge on risk of losing some volumes to illicit industry,\u201d Jefferies said in a note.<\/p>\n

Also Read : Massive Cut in Tax Demand Lifts Blue Dart Shares 9%, Relief Comes from Rs.421 Crore to Rs.65 Lakh<\/a><\/p>\n

Cigarette Prices May Rise Sharply to Protect Margins<\/h2>\n

According to brokerages, the new excise duty could significantly raise the overall tax burden on cigarettes. ICICI Securities estimated that the levy translates into a 22\u201328 percent increase in total costs for cigarettes in the 75\u201385 mm category.<\/p>\n

In a note accessed by CNBC-Awaaz, a brokerage said ITC may need to raise cigarette prices by at least 15 percent to fully pass on the impact of higher taxes to consumers.<\/p>\n

\u201cWe also note that the revised GST rate on tobacco was recently raised to 40%, which will also have a cascading impact as ITC takes up cigarette price hikes,\u201d the note said.
\u201cBasis our understanding, ITC may need to take up prices by at least 15% to pass on the overall impact to consumers, if not higher.\u201d<\/p>\n

For longer cigarettes, which account for a meaningful share of ITC\u2019s portfolio, the price impact could be even more pronounced.<\/p>\n

Brokerages Turn Cautious as Volume Risks Re-Emerge<\/h2>\n

Analysts highlighted that higher cigarette prices have historically resulted in volume compression, particularly in a price-sensitive market like India. ICICI Securities pointed out that cigarettes longer than 75 mm account for around 16 percent of ITC\u2019s volumes and could see price hikes of Rs 2\u20133 per stick.<\/p>\n

Given the sharp move in the stock, ICICI Securities advised investors to exit long positions in ITC January futures, stating that stop-loss levels had been triggered.<\/p>\n

Market experts also cautioned that despite ITC\u2019s diversified business model, cigarettes remain a key earnings driver.<\/p>\n

\u201cThe current excise duty hike is a substantial near-term deterrent to the cigarette operations of the company,\u201d said Siddharth Maurya, Founder & Managing Director at Vibhavangal Anukulakara Pvt Ltd.
\u201cIt is also likely to impact the volumes of sales due to prices being forced further upward. Although the company has a diversified business, the sensitivity of earnings to the tobacco sector means the stock price will remain volatile.\u201d<\/p>\n

Tax Structure on Tobacco Set to Become Heavier from February<\/h2>\n

Currently, tobacco products in India attract a complex tax structure comprising:<\/p>\n