{"id":601,"date":"2026-01-02T11:08:54","date_gmt":"2026-01-02T05:38:54","guid":{"rendered":"https:\/\/www.malharinvestments.com\/blog\/?p=601"},"modified":"2026-05-21T07:59:36","modified_gmt":"2026-05-21T02:29:36","slug":"itc-brokerage-downgrades-cigarette-excise-duty-hike","status":"publish","type":"post","link":"https:\/\/www.malharinvestments.com\/blog\/itc-brokerage-downgrades-cigarette-excise-duty-hike\/","title":{"rendered":"ITC Faces Brokerage Downgrades After Sharp Cigarette Excise Duty Hike"},"content":{"rendered":"\n<p class=\"has-black-color has-text-color has-link-color wp-elements-96c23654a97b679448ab2c9b634afb8a wp-block-paragraph\"><a href=\"https:\/\/www.malharinvestments.com\/blog\/\">Home<\/a>\u00a0>\u00a0<a href=\"https:\/\/www.malharinvestments.com\/blog\/stock-market-news\/\">Stock Market News<\/a>\u00a0> ITC Stock Under Pressure<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><em>January 2, 2026 \u2014 New Delhi<\/em><\/p>\n\n\n\n<p class=\"has-black-color has-text-color has-link-color wp-elements-5de93bd10c46cfcb87fe616d04caaa2d wp-block-paragraph\" style=\"font-size:18px\">ITC shares came under pressure after a sharp hike in cigarette excise duty led brokerages to downgrade the stock, citing volume risks and earnings pressure.<\/p>\n\n\n\n<p class=\"has-black-color has-text-color has-link-color wp-elements-a1c22c3006174d8bd8c596da01c3a5f5 wp-block-paragraph\" style=\"font-size:18px\">Shares of <strong>ITC Ltd.<\/strong> came under intense pressure in early 2026 after the Government of India implemented a sharp increase in excise duties on cigarettes, prompting a wave of <strong>brokerage downgrades, target price cuts, and concerns about near-term earnings and volume performance<\/strong> for the country\u2019s leading tobacco and FMCG conglomerate.<\/p>\n\n\n<div class=\"wp-block-image\">\n<figure class=\"aligncenter size-large\"><img loading=\"lazy\" decoding=\"async\" width=\"1024\" height=\"704\" src=\"https:\/\/www.malharinvestments.com\/blog\/wp-content\/uploads\/2026\/01\/ITC-Shares-Slide-as-Analysts-Flag-Earnings-Risk-After-Excise-Duty-Hike-1024x704.jpg\" alt=\"ITC Shares Slide as Analysts Flag Earnings Risk After Excise Duty Hike\" class=\"wp-image-604\" srcset=\"https:\/\/www.malharinvestments.com\/blog\/wp-content\/uploads\/2026\/01\/ITC-Shares-Slide-as-Analysts-Flag-Earnings-Risk-After-Excise-Duty-Hike-1024x704.jpg 1024w, https:\/\/www.malharinvestments.com\/blog\/wp-content\/uploads\/2026\/01\/ITC-Shares-Slide-as-Analysts-Flag-Earnings-Risk-After-Excise-Duty-Hike-300x206.jpg 300w, https:\/\/www.malharinvestments.com\/blog\/wp-content\/uploads\/2026\/01\/ITC-Shares-Slide-as-Analysts-Flag-Earnings-Risk-After-Excise-Duty-Hike-768x528.jpg 768w, https:\/\/www.malharinvestments.com\/blog\/wp-content\/uploads\/2026\/01\/ITC-Shares-Slide-as-Analysts-Flag-Earnings-Risk-After-Excise-Duty-Hike.jpg 1062w\" sizes=\"auto, (max-width: 1024px) 100vw, 1024px\" \/><\/figure>\n<\/div>\n\n\n<h3 class=\"wp-block-heading has-black-color has-text-color has-link-color wp-elements-7ece0b445c95200aa8f0cc031c3e4495\" style=\"font-size:22px\"><strong>Market Reaction: Sharp Stock Declines and Downgrades<\/strong><\/h3>\n\n\n\n<p class=\"has-black-color has-text-color has-link-color wp-elements-a57ddd4a1cf24a64b2dd3223693badcd wp-block-paragraph\" style=\"font-size:18px\">The market reaction was swift. ITC\u2019s share price suffered broad declines, hitting fresh <strong>52-week lows<\/strong> and wiping out significant market value. Brokers and analysts pointed to the excise duty hike as a principal catalyst for the sell-off, triggering revisions to earnings forecasts and investor sentiment.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\" style=\"font-size:20px\"><strong>Among the early responses<\/strong>:<\/p>\n\n\n\n<ul style=\"font-size:18px\" class=\"wp-block-list has-black-color has-text-color has-link-color wp-elements-e466a5028d7e5cb9b99fb2fd1ead3884\">\n<li><strong>PhillipCapital<\/strong> downgraded ITC from <em>Buy<\/em> to <em>Reduce<\/em>, slashing its <strong>target price from \u20b9528 to \u20b9348<\/strong>, and warned that steep excise hikes could lead to a 12.5% decline in cigarette volumes in FY27.<\/li>\n\n\n\n<li><strong>Nuvama Institutional Equities<\/strong> cut its rating from <em>Buy<\/em> to <em>Hold<\/em> and trimmed its target to <strong>\u20b9415 from \u20b9534<\/strong>, highlighting heightened taxation and pricing pressures.<\/li>\n\n\n\n<li><strong>Emkay<\/strong> downgraded ITC from <em>Add<\/em> to <em>Reduce<\/em> and brought its target down to <strong>\u20b9350<\/strong>, characterising the tax move as a \u201cfiscal bombshell\u201d and forecasting significant price hikes across cigarette categories.<\/li>\n\n\n\n<li><strong>Motilal Oswal<\/strong> shifted its call to <em>Neutral<\/em> from <em>Buy<\/em> with a reduced target of <strong>\u20b9400<\/strong>, noting that valuation multiples could reset under the higher-tax regime.<\/li>\n\n\n\n<li>Some brokerages, including <strong>B&amp;K Securities<\/strong> and <strong>Antique Stock Broking<\/strong>, maintained <em>Buy<\/em> ratings but still implemented meaningful target cuts, reflecting near-term uncertainty.<\/li>\n<\/ul>\n\n\n\n<h3 class=\"wp-block-heading has-black-color has-text-color has-link-color wp-elements-469c8d48630176f0ba744877da283512\" style=\"font-size:22px\"><strong>Excise Duty Hike: Details and Financial Implications<\/strong><\/h3>\n\n\n\n<p class=\"has-black-color has-text-color has-link-color wp-elements-dc26f5842c56cf84c3f7e6733b8eb407 wp-block-paragraph\" style=\"font-size:18px\">The Government of India\u2019s revised excise structure, effective February 1, 2026, levies <strong>higher specific duties on cigarettes across categories<\/strong>, ranging between <strong>\u20b92,050 and \u20b98,500 per 1,000 sticks<\/strong> based on product length. This is in addition to the existing 40% Goods and Services Tax (GST) already applied to tobacco products.<\/p>\n\n\n\n<p class=\"has-black-color has-text-color has-link-color wp-elements-7363852b1f1e19c40b19ee708f126253 wp-block-paragraph\" style=\"font-size:18px\">Brokerages estimate that, to pass on the full tax burden to consumers, <strong>retail prices may need to rise by as much as 23\u201350%<\/strong>, depending on the cigarette segment. This has raised concerns about <strong>consumer down-trading<\/strong> to lower-priced alternatives, erosion of volumes, and the potential growth of illicit consumption in response to higher retail prices.<\/p>\n\n\n\n<h3 class=\"wp-block-heading has-black-color has-text-color has-link-color wp-elements-6a0139811931871349db3c20f618aa58\" style=\"font-size:22px\"><strong>Volume and Earnings Pressure Forecast<\/strong><\/h3>\n\n\n\n<p class=\"has-black-color has-text-color has-link-color wp-elements-41907ed4dd38e540c7c4ca443f50801c wp-block-paragraph\" style=\"font-size:18px\">Analysts are revising earnings forecasts downward for ITC\u2019s cigarette business:<\/p>\n\n\n\n<ul style=\"font-size:18px\" class=\"wp-block-list has-black-color has-text-color has-link-color wp-elements-500bb9373e0f7db75273ff0dcd0e250a\">\n<li>PhillipCapital forecasts a <strong>12.5% volume decline in FY27<\/strong> with only moderate recovery anticipated in FY28.<\/li>\n\n\n\n<li>DAM Capital anticipates a roughly <strong>7% volume de-growth<\/strong> in FY27 and significant consumer price increases.<\/li>\n\n\n\n<li>Nuvama has projected a broader impact on EBITDA and expects <strong>year-on-year declines in both EBITDA and volumes<\/strong> if elevated pricing dampens demand.<\/li>\n<\/ul>\n\n\n\n<p class=\"has-black-color has-text-color has-link-color wp-elements-0e268084c737ca6ee6e1f33097dcbf73 wp-block-paragraph\" style=\"font-size:18px\">Despite near-term pressure, some brokerages remain cautiously optimistic about ITC\u2019s <strong>diversified revenue streams<\/strong>, including its non-tobacco FMCG and paperboard segments, which could offer resilience as cigarette volumes adjust.<\/p>\n\n\n\n<h3 class=\"wp-block-heading has-black-color has-text-color has-link-color wp-elements-281a3c81fa394b4c727da518420cd170\" style=\"font-size:22px\"><strong>Investor Sentiment and Broader Market Impact<\/strong><\/h3>\n\n\n\n<p class=\"has-black-color has-text-color has-link-color wp-elements-711082891228ff78a4f29f5735cf29e7 wp-block-paragraph\" style=\"font-size:18px\">The industry-wide negative sentiment extended beyond ITC. Tobacco and cigarette stocks, including peers such as Godfrey Phillips India, also experienced significant selling pressure, contributing to a broader drag on the FMCG segment.<\/p>\n\n\n\n<p class=\"has-black-color has-text-color has-link-color wp-elements-c6999574281754da4cd2569ad24e3331 wp-block-paragraph\" style=\"font-size:18px\">The sell-off has prompted investors to re-evaluate their exposure to the cigarette segment, especially as taxes now form a larger portion of retail price structures without clear evidence that elevated pricing would be sustainable in volume terms.<\/p>\n\n\n\n<h3 class=\"wp-block-heading has-black-color has-text-color has-link-color wp-elements-5efae0186b969aac0f69097d12d89873\" style=\"font-size:22px\"><strong>Long-Term Outlook: Cautious Bullishness Amid Policy Headwinds<\/strong><\/h3>\n\n\n\n<p class=\"has-black-color has-text-color has-link-color wp-elements-1b6db527da6cd910a964a3b9ed9ac62c wp-block-paragraph\" style=\"font-size:18px\">While the excise duty increase has introduced immediate challenges, several analysts maintain that ITC\u2019s <strong>long-term fundamentals remain intact<\/strong> due to its market leadership, diversified business portfolio, and strong distribution network.<\/p>\n\n\n\n<p class=\"has-black-color has-text-color has-link-color wp-elements-e57a1001abe887ad7fab128dab833cfc wp-block-paragraph\" style=\"font-size:18px\">Nevertheless, near-term performance \u2014 particularly volume recovery and price pass-through effectiveness \u2014 will be key in shaping future earnings and equity valuations.<\/p>\n\n\n\n<h3 class=\"wp-block-heading has-black-color has-text-color has-link-color wp-elements-72a3d2a48cf1904d179d49bbe8853ed8\" style=\"font-size:22px\">FAQs about ITC Stock<\/h3>\n\n\n<div id=\"rank-math-faq\" class=\"rank-math-block\">\n<div class=\"rank-math-list \">\n<div id=\"faq-question-1767331140780\" class=\"rank-math-list-item\">\n<h4 class=\"rank-math-question \">Why are brokerages downgrading ITC stock?<\/h4>\n<div class=\"rank-math-answer \">\n\n<p>Brokerages downgraded ITC after a sharp cigarette excise duty hike raised concerns about higher prices, lower volumes, and near-term earnings pressure.<\/p>\n\n<\/div>\n<\/div>\n<div id=\"faq-question-1767331159540\" class=\"rank-math-list-item\">\n<h4 class=\"rank-math-question \">How does the excise duty hike affect ITC\u2019s business?<\/h4>\n<div class=\"rank-math-answer \">\n\n<p>The hike increases retail prices, which could reduce cigarette consumption, impact margins, and lead to down-trading or illicit sales.<\/p>\n\n<\/div>\n<\/div>\n<div id=\"faq-question-1767331174314\" class=\"rank-math-list-item\">\n<h4 class=\"rank-math-question \">Will ITC pass on the tax hike to consumers?<\/h4>\n<div class=\"rank-math-answer \">\n\n<p>Analysts expect ITC to raise prices significantly to offset higher taxes, though full pass-through may affect demand.<\/p>\n\n<\/div>\n<\/div>\n<div id=\"faq-question-1767331188172\" class=\"rank-math-list-item\">\n<h4 class=\"rank-math-question \">Is ITC still a long-term investment?<\/h4>\n<div class=\"rank-math-answer \">\n\n<p>Some analysts remain cautious but note that ITC\u2019s diversified FMCG portfolio and strong balance sheet offer long-term stability.<\/p>\n\n<\/div>\n<\/div>\n<div id=\"faq-question-1767331212006\" class=\"rank-math-list-item\">\n<h4 class=\"rank-math-question \">Which segment of ITC is most impacted?<\/h4>\n<div class=\"rank-math-answer \">\n\n<p>The cigarette segment, which contributes a major share of profits, is the most affected by the excise duty hike.<\/p>\n\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n\n\n<p class=\"has-black-color has-text-color has-link-color wp-elements-7832cc2677540d2d1999d3f5a0b076f7 wp-block-paragraph\" style=\"font-size:20px\"><strong>Also Read<\/strong>:<\/p>\n\n\n\n<ul style=\"font-size:18px\" class=\"wp-block-list has-black-color has-text-color has-link-color wp-elements-2367b39e244626b7fb29396b8ac87e20\">\n<li><a href=\"https:\/\/www.malharinvestments.com\/blog\/why-5starsstocks-com-is-gaining-popularity-among-retail-investors\/\">Why 5StarsStocks.com Is Gaining Popularity Among Retail Investors<\/a><\/li>\n\n\n\n<li><a href=\"https:\/\/www.malharinvestments.com\/blog\/neelkanth-invested-45000-for-3-years\/\">Neelkanth invested 45000 for 3 years<\/a><\/li>\n\n\n\n<li><a href=\"https:\/\/www.malharinvestments.com\/blog\/adani-power-shares-jump-earnings-upcycle-brokerage-outlook\/\">Adani Power Shares Rally 7%<\/a><\/li>\n<\/ul>\n\n\n\n<p class=\"has-black-color has-text-color has-link-color wp-elements-ad460cfdd4c26de6553eb87a1b1a03d5 wp-block-paragraph\" style=\"font-size:18px\"><strong>Disclaimer<\/strong>: This article is for informational purposes only and does not constitute investment advice. Investors should consult a financial advisor before making investment decisions.<\/p>\n\n\n\n<p class=\"has-black-color has-text-color has-link-color wp-elements-8ac49aac84c86e379120e8f6d8d636e0 wp-block-paragraph\" style=\"font-size:18px\">Feel free to\u00a0<a href=\"https:\/\/www.malharinvestments.com\/blog\/write-for-us\/\">Write for Us<\/a>\u00a0about\u00a0Finance and\u00a0<strong>Follow Us on<\/strong>:\u00a0<a href=\"https:\/\/x.com\/malharinvest\" target=\"_blank\" rel=\"noreferrer noopener\">Twitter<\/a>,\u00a0<a href=\"https:\/\/www.facebook.com\/malharinvestments\" target=\"_blank\" rel=\"noreferrer noopener\">Facebook<\/a>,\u00a0<a href=\"https:\/\/www.instagram.com\/malharinvestments\/\" target=\"_blank\" rel=\"noreferrer noopener\">Instagram<\/a>,\u00a0<a href=\"https:\/\/www.threads.com\/@malharinvestments\" target=\"_blank\" rel=\"noreferrer noopener\">Threads<\/a>, and\u00a0<a href=\"https:\/\/chat.whatsapp.com\/BTgbrUe1u3EKnOPio5C6e6\" target=\"_blank\" rel=\"noreferrer noopener\">Whatsapp Group<\/a>.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>ITC shares came under pressure after a sharp hike in cigarette excise duty led brokerages to downgrade the stock, citing volume risks and earnings pressure.<\/p>\n","protected":false},"author":32,"featured_media":603,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[162],"tags":[167,169,166,163,165,164,168],"class_list":["post-601","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-stock-market-news","tag-brokerage-downgrades","tag-budget-impact","tag-cigarette-excise-duty","tag-fmcg-stocks","tag-indian-stock-market","tag-itc-ltd","tag-tobacco-stocks"],"_links":{"self":[{"href":"https:\/\/www.malharinvestments.com\/blog\/wp-json\/wp\/v2\/posts\/601","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.malharinvestments.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.malharinvestments.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.malharinvestments.com\/blog\/wp-json\/wp\/v2\/users\/32"}],"replies":[{"embeddable":true,"href":"https:\/\/www.malharinvestments.com\/blog\/wp-json\/wp\/v2\/comments?post=601"}],"version-history":[{"count":3,"href":"https:\/\/www.malharinvestments.com\/blog\/wp-json\/wp\/v2\/posts\/601\/revisions"}],"predecessor-version":[{"id":606,"href":"https:\/\/www.malharinvestments.com\/blog\/wp-json\/wp\/v2\/posts\/601\/revisions\/606"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.malharinvestments.com\/blog\/wp-json\/wp\/v2\/media\/603"}],"wp:attachment":[{"href":"https:\/\/www.malharinvestments.com\/blog\/wp-json\/wp\/v2\/media?parent=601"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.malharinvestments.com\/blog\/wp-json\/wp\/v2\/categories?post=601"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.malharinvestments.com\/blog\/wp-json\/wp\/v2\/tags?post=601"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}