Shares of India's largest cigarette maker, ITC, suffered their steepest single-day decline in nearly six years on Thursday, with shares crashing 10% and wiping out over Rs 50,000 crore in market capitalisation after the Finance Ministry imposed a sharp new tax on cigarettes late on Wednesday. The stock plummeted to a fresh 52-week low of Rs 362.7 at the end of market hours. From 1 February 2026, cigarettes will be charged an excise duty of ₹2,050-8,500 per 1,000 sticks, according to a government notification released late Wednesday. That's on top of GST at 40% on tobacco-based products and cigarettes—also kicking in from 1 February.
Meanwhile, Godfrey Phillips India Ltd. dropped 17.6% on the BSE. ITC sells cigarette brands like Classic and Gold Flake, while Godfrey sells Marlboro and Four Square. ITC gets more than 40% of its revenue from cigarettes.British American Tobacco Plc, ITC’s largest shareholder, has been selling down its stake in the Indian cigarette maker. In May, it sold about $1.5 billion worth of stock to pare its holding to 22.91%. The Bloomberg report also suggested that it was the worst single-day fall for ITC stock since 2020, making it the biggest Sensex loser today.
The sharp correction in ITC following the excise duty hike should be viewed more as a sentiment-driven adjustment than a structural reset of fundamentals, said Harshal Dasani, Business Head at INVAsset PMS.He said that historically, cigarette tax hikes tend to trigger immediate stock price reactions as markets discount near-term volume pressure and margin uncertainty. "However, over time, the actual earnings impact has often been more measured, given the industry’s ability to pass on taxes through calibrated price increases."G Chokkalingam, Founder, Equionomics Research, sees multiple overhangs on the ITC stock as he remains doubtful over its ability to give any meaningful returns.Chokkalingam said that the highly profitable hotel business is no longer a direct part of it. "The paper segment is doing badly, the IT services segment has also not shown significant profit growth, and other FMCG growth also remains slow. Further, equity selling by its largest shareholder, British American Tobacco Plc, is also possible, leading to more pressure on the stock price front," he said. Against this backdrop, the market veteran said that in the best-case scenario, ITC is just a HOLD after today’s meltdown.
According to Dasani, for long-term investors, such policy-led drawdowns often create opportunities to accumulate high-quality, cash-rich businesses at more reasonable valuations. "Near-term volatility cannot be ruled out until there is greater clarity on pricing actions and volume trends over the next few quarters." As per Trendlyne data, 23 analysts have 'Strong Buy', 10 analysts have 'Buy', and one analyst has each 'Hold' and 'Sell' ratings on ITC stock. ITC share price has slumped 24% in a year, and is down 12% in six months.