Cigarette Tax Hike Shocks Market: ITC, Godfrey Phillips Shares Plummet

• Finance Ministry hiked excise duty on cigarettes, effective February 1, 2026, increasing tax incidence by over 20%.
• ITC shares plunged 9.2%, and Godfrey Phillips India fell 14.1% following the announcement.
• Brokerage Jefferies called it a "negative surprise," expecting short-term volume/earnings pressure and increased illicit trade.
• ICICI Securities estimates a 22-28% cost increase for certain cigarettes, requiring ₹2-₹3 price hikes per stick.
• Despite short-term concerns, Jefferies maintains a 'Buy' rating on ITC, citing long-term potential with strategic management.

Why It Matters: Major cigarette tax hike effective 2026 sends industry stocks plummeting, raising illicit trade concerns.