NEW YORK, January 1, 2026, 03:07 ET — Market closed
- ITC shares slid about 9% in Mumbai after India notified a higher excise duty on cigarettes from Feb. 1
- Brokerages flagged suggests higher costs and price hikes that can pressure cigarette volumes
- Tobacco peer Godfrey Phillips India also fell sharply on the policy move
ITC Ltd (ITC.NS) fell sharply on Thursday, with the stock last down 8.9% at 367.10 rupees after India notified a higher excise duty on cigarettes. The shares traded between 402.30 and 362.70 rupees. 1
The tax shock matters because it feeds directly into retail cigarette prices, and higher prices can curb consumption. Investors also watch whether the gap between legal and illegal prices widens, lifting the illicit market and squeezing reported volumes.
India’s finance ministry late on Wednesday set an excise duty — a tax charged on specific goods — of 2,050 to 8,500 rupees per 1,000 cigarette sticks depending on length, effective Feb. 1, an order showed. The levy comes on top of an existing 40% goods-and-services tax (GST) and applies to a market of roughly 100 million smokers, Reuters reported. Jefferies said the change was negative and could hurt sales volumes, while ICICI Securities estimated it implies a 22%–28% rise in overall costs for 75–85 mm cigarettes; the brokerage said cigarettes longer than 75 mm account for about 16% of ITC’s volumes and may require price increases of 2–3 rupees per stick, with ITC leading declines on benchmark and consumer-staples gauges as peer Godfrey Phillips India fell about 14%. 2
Cigarettes above 75 mm are a smaller slice of volumes, but they tend to be higher value and are often where companies test price hikes first. That puts the market’s attention on how quickly ITC adjusts pricing ahead of the Feb. 1 start date.
India’s benchmark indexes were little changed in early trade as gains in Reliance Industries and Mahindra & Mahindra offset the drop in cigarette makers. “Benchmarks are expected to remain sideways with selective buying amid thin trading volumes due to New Year holidays across global markets,” said Siddhartha Khemka, head of research at Motilal Oswal Financial Services. 3
ITC ended 2025 at 403.00 rupees on Dec. 31 after rising 0.6% in that session, according to exchange data compiled by Yahoo Finance. 4
The selloff weighed on consumer-staples sentiment because ITC is a heavyweight in the fast-moving consumer goods (FMCG) basket. FMCG companies sell everyday items such as packaged food and soap, which tends to make policy-driven shocks show up quickly in sector moves.
The market’s near-term focus is whether ITC can pass through the higher taxes without triggering a lasting hit to volumes. Traders also watch for signs that demand shifts to untaxed cigarettes, which erodes the legal industry’s pricing power.
Before the next session, the immediate marker is whether ITC holds above 360 rupees after the drop to 362.70. A stabilisation there would suggest bargain-hunting is returning after the policy shock.
Pricing headlines will remain in the driver’s seat. With the duty scheduled to take effect on Feb. 1, investors are watching how quickly ITC and peers reset retail prices and whether they use pack changes or promotions to manage the transition.
Beyond tobacco, attention is also on the broader January earnings run-rate and the policy backdrop into India’s union budget, where traders remain alert for further changes that could hit consumption-linked sectors.
