Shares of FMCG giant ITC fell 1% to ₹334.85 apiece, hitting a fresh 52-week low, on Tuesday, January 13, as the market reacted to broader weakness and the looming excise duty hike on cigarettes.
The FMCG stock has been in focus since the beginning of the year after the government announced a hike in cigarette taxes, which will be effective from February 1, 2026.
Tax hike on tobacco
In December 2025, the Indian government announced an additional excise duty on tobacco products effective February 1.
The finance ministry announced amendments to the Central Excise Act that introduced excise duty ranging from ₹2,050 to ₹8,500 per 1,000 cigarette sticks, depending on their length. This levy will apply in addition to the now increased 40% GST.
The government also notified the Health and National Security Cess Act, under which a cess will be imposed on the manufacturing capacity of pan masala–related businesses starting February 1.
Despite these changes, the overall tax burden on pan masala will remain unchanged at 88%, inclusive of the 40% GST.
The revised framework replaces the earlier tax regime that comprised 28% GST along with a compensation cess on tobacco and allied products.
Should you buy or sell ITC stock?
Since the announcement by the government, the ITC stock has witnessed downgrades from several brokerages.
Nuvama has lowered its rating on the stock to “hold” from “buy” and revised its price target to ₹415– ₹534 per share, saying that the magnitude of the tax hike seems higher than anticipated.
“While we expected a sharp tax hike on cigarettes, the magnitude seems higher than anticipated, likely prompting consensus downgrades to ITC's cigarette volume and EBITDA estimates, as well as multiples,” said the firm in a note.
Similarly, Motilal Oswal also downgraded ITC from “buy” to “neutral” and reduced its target price to ₹400, citing that a stable tax regime curtailed the illicit cigarette market, helping ITC’s cigarette volumes grow at a 5% CAGR over the past five years. The tax hike could shift volumes from legal to illicit brands and could lead to downtrading within the legal brands, it opined.
Motilal Oswal also estimates a price hike of at least 25% at a portfolio level just to maintain the current net realisation per cigarette stick. It added that earnings pressure on cigarettes would take away the near-term catalysts (soft tobacco prices, recovery in FMCG and Paper) and comfort on valuation.
Meanwhile, Axis Securities has also revised its rating on the ITC stock to ‘Hold', cutting the target price to ₹380. “Considering the recent tax hikes in the cigarette business and near-term headwind in the industry, we cut the margin estimates for FY26/FY27 but remain positive on medium to long-term growth,” the firm said.
ITC share price trend
The FMCG stock has remained under pressure in the near-term. ITC's share price has lost 17% during the nine trading sessions in January. Meanwhile, the FMCG stock has shed nearly 20% in the last six months and 24% in one year.
ITC shares are listed on both the BSE and NSE. It hit a 52-week high of ₹471.50 on February 1, 2025.
Disclaimer: This story is for educational purposes only. The views and recommendations above are those of individual analysts or broking companies, not Mint. We advise investors to check with certified experts before making any investment decisions.
