Cigarette Stocks Rally: Why Buying Interest Returned

ITC and other cigarette stocks such as Godfrey Phillips India and VST Industries rose sharply, with some stocks gaining up to 13%, driven by a mix of pricing action, valuation comfort, and easing concerns around taxation. Recent Price Performance ITC: up around 4–5% Godfrey Phillips India: up 10–13% VST Industries: up 6–8% Key Reasons Behind the Rally (With Data Support) 1. Price Hikes Implemented Post Tax Change Following the excise duty revision effective 1 February 2026, cigarette companies increased prices by around ₹22–₹55 per pack, depending on brand and size. This confirms strong pricing power and the ability to pass on higher taxes to consumers. 2. Tax Impact Already Priced In In January, cigarette stocks corrected sharply due to tax fears: ITC declined nearly 20% Godfrey Phillips fell around 26% VST Industries corrected about 9% With price hikes in place, markets are reassessing that the earnings impact may be manageable. 3. Value Buying After Sharp Correction The recent decline pushed stocks below their short-term average valuations, attracting value buyers and long-term investors looking for stable cash-generating businesses. 4. Earnings Resilience Supports Confidence ITC reported ~6–7% YoY growth in both revenue and net profit in the latest quarter. Godfrey Phillips India delivered ~15–16% revenue growth and ~9% profit growth YoY. These numbers indicate that cigarette companies continue to generate steady earnings despite regulatory pressure. 5. Institutional Activity and Volume Spike Over 1.3 crore ITC shares were traded in block deals at a premium of around 4% to the previous close, signalling renewed institutional interest and adding momentum to the rally.