Smoky Start to 2026: Cigarette Stocks Take A Hit
Why ITC Share Share Falling Today? ?
Investors in ITC and Godfrey Phillips felt the burn on Thursday, January 1, as shares plunged up to 10% after the government announced a hefty new excise duty on cigarettes. Effective next month, the ₹2,050–₹8,500 levy per 1,000 sticks is set to hike retail prices, potentially cooling sales.
Traders reacted quickly, sending stocks downward and reminding everyone that even profitable industries can get burned when taxes rise. For smokers and investors alike, the new year started with a sharp pinch, smoke may be rising, but profits are clearly under pressure.
Why Cigarette Shares Are Feeling the Burn? Here’s New Excise Duty
Cigarette stocks are coughing up losses after the government announced a hefty new excise duty of ₹2,050–8,500 per 1,000 sticks, based on length, effective February 1, 2026. Added on top of the 40% GST, this levy could make your next smoke pricier.
Investors are already feeling the pinch, betting higher costs will hit sales for ITC, Godfrey Phillips, and others. So, while smokers might notice the burn in their wallets, the stock market is catching a whiff too.
ITC Share Price Hits 52-Week Low
Following the announcement, ITC shares fell as much as 6% on the BSE, hitting a 52-week low of ₹379. A block deal of 4.03 crore shares worth ₹1,614.5 crore at ₹400 each added further pressure.
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One-year decline: 17%
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Six-month decline: 9%
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Market cap: Over ₹4,75,000 crore
Impact Of New Excise Duty: Cigarette Shares Feel The Heat
The recent cigarette tax hike by the government has made a loud announcement both to investors and smokers. The new excise is layered on the already hefty 40% GST and aims at decreasing tobacco usage, however, it is also destructively affecting investors’ portfolios. The analysis conducted by ICICI Securities, considering the new price list, claims that the 75–85 mm categories of cigarettes, which constitute almost 16% of ITC’s total volumes, will face a cost increase of 22–28%. It is predicted that retail prices will go up by ₹2–3 per stick, thus smokers might suffer first before the investors. Jefferies analysts are saying it’s a “clear negative” and that it will likely cut down on sales volume and drive smokers toward the unofficial market.
Here’s what’s brewing for cigarette companies:
- Cost increase: 22–28% for longer cigarettes
- Volume impact: 16% of ITC’s sales at risk
- Retail price hike: ₹2–3 per stick
- Investor sentiment: Shares under pressure
- Market risk: Possible growth of illicit trade
For smokers and shareholders alike, this tax is more than a small puff, it’s a strong hit to margins and wallets.
Market Impact
- ITC was the biggest loser on the Nifty 50 and led declines on the FMCG index, which fell 3.2%
- Godfrey Phillips faced its steepest fall since November 2016
Government ObjectiveWith New Excise Duty: Smoking Cost Just Got Hotter
By raising the taxes on cigarettes, the government is not only punishing smokers but also making a strong statement to investors. The judicial use of taxes and promotion of larger health warnings are the main means for this government movement. Already, cigarette taxes constitute 53% of the retail price, but there is still a long way to go before the WHO’s 75% mark is reached. This whole thing can be viewed as either a nudge or shove toward trying to get smokers to switch their habits while at the same time making smoking quite expensive. Smokers are feeling the pinch, and cigarette companies are losing profits. Investors should keep this matter in mind, since such regulatory changes may increase overhead, impact sales, and cause stock prices to behave erratically.
Aishwarya is a journalism graduate with over three years of experience thriving in the buzzing corporate media world. She’s got a knack for decoding business news, tracking the twists and turns of the stock market, covering the masala of the entertainment world, and sometimes her stories come with just the right sprinkle of political commentary. She has worked with several organizations, interned at ZEE and gained professional skills at TV9 and News24, And now is learning and writing at NewsX, she’s no stranger to the newsroom hustle. Her storytelling style is fast-paced, creative, and perfectly tailored to connect with both the platform and its audience. Moto: Approaching every story from the reader’s point of view, backing up her insights with solid facts.
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