NEW YORK, January 1, 2026, 09:47 ET — Market closed
- Nifty 50 ends up 0.06% at 26,146.55; Sensex slips 0.04%
- Auto shares gain on December dealer sales; Ashok Leyland hits a record
- ITC dives after India raises cigarette excise duty from Feb. 1
India’s Nifty 50 ended little changed on the National Stock Exchange of India (NSE) on Thursday, as auto gains offset a sharp selloff in cigarette makers after New Delhi raised taxes on cigarettes.
The benchmark closed up 0.06% at 26,146.55, while the BSE Sensex eased 0.04% to 85,188.6.
The move matters because ITC is a heavyweight in the index and in the fast-moving consumer goods (FMCG) sector — makers of everyday staples that tend to be sensitive to tax and pricing changes.
It also puts policy back in focus early in 2026, with traders looking ahead to corporate earnings and India’s union budget in February for clues on growth and consumption.
Trading was muted with global markets shut for the New Year holiday, a thin backdrop that can amplify stock-specific shocks even when the headline index barely moves.
Twelve of the 16 major sectors ended higher on the day, while the broader mid-cap index rose 0.4% and small-caps fell 0.1%.
Autos led gains, with the Nifty Auto index up 1% after December sales to dealers rose from a year earlier, helped by recent tax cuts. Mahindra & Mahindra gained 1.4%, while Ashok Leyland jumped 3.2% to a record high.
Cigarette makers were the drag. ITC fell 9.7% and Godfrey Phillips India dropped 17.1%, the weakest performers on the Nifty 50.
India’s finance ministry late Wednesday notified an excise duty — a tax levied on goods produced domestically — of 2,050 to 8,500 rupees per 1,000 cigarette sticks depending on their length, effective Feb. 1. ITC slid as much as 9.2% to 365.50 rupees, its lowest since April 2023, before settling lower.
Jefferies analysts called the levy “a clear negative” for market leader ITC, warning it would weigh on cigarette volumes and revive concerns about share loss to the illicit market. Analysts at ICICI Securities said the duty implies a 22%-28% cost increase for 75–85 mm cigarettes and could translate into 2–3 rupees per stick in price hikes, on top of the existing 40% Goods and Services Tax (GST), India’s nationwide consumption tax.
Outside the day’s main themes, Piccadily Agro climbed 6.8% after it began commercial production at its Chhattisgarh unit.
The session followed a broad-based rally on Dec. 31, when the Nifty rose 0.74% as metal shares climbed after India imposed a three-year import tariff on select steel products. SAMCO Securities analyst Dhupesh Dhameja said the benchmark stayed stuck in a broader consolidation zone in December amid muted volumes.
Strategists have leaned more constructive on 2026 even after India’s benchmarks logged their tenth straight year of gains in 2025, though they lagged broader emerging-market and Asian peers. Brokerage estimates compiled by Reuters put the Nifty at 28,992 by end-2026, about 12% above current levels, with analysts flagging relatively more attractive large-cap valuations and a risk of “market polarisation” between big and small names. A forward P/E — price-to-earnings ratio based on expected profit — is one way investors gauge that valuation gap. Reuters
“Going ahead, investor sentiment is likely to hinge on corporate earnings and a strength in economic growth,” said Vinod Nair, head of research at Geojit Investments. Analysts are also watching for progress on an India–U.S. trade agreement and policy cues from the February budget. Reuters
Before the next session, investors will look for signs of how cigarette makers plan to handle the tax shock — through price increases, product mix changes, or tighter cost control — and whether the selling spills over into broader consumer staples.
Quarterly results and management commentary will be the next hard catalyst for index direction, with traders also tracking whether the auto-led bid holds once holiday-thinned liquidity fades.
