ITC's shares have experienced a dramatic decline, with the company's market capitalization falling to ₹3.32 lakh crore at Tuesday's close, representing a 34% drop for 2026. According to reports from Live Mint, the stock has hit multi-year lows after touching a record high of ₹499 in September 2024 and subsequently losing 47% from that peak. The fall has created significant wealth erosion for shareholders, with the company's market value eroding by ₹1.72 lakh crore during this period. For a blue-chip stock, this kind of decline is rare, highlighting deepening investor concerns about the company's near-term prospects.
ITC Limited, India's largest cigarette manufacturer, has faced significant pressure following the Government of India's decision to impose higher excise duties on cigarettes. According to reports from ET Now, the government introduced an excise duty ranging from ₹2,050 to ₹8,500 per 1,000 cigarette sticks, depending on product length, with effect from February 1. Following this announcement, ITC's stock declined nearly 30% year-to-date, reflecting investor concerns over the earnings impact of increased taxation on the company's core cigarette business. The stock began the year with a massive 20% drop in January and the weakness persisted through subsequent months, with the company raising prices across several cigarette brands to offset the tax burden.
The FMCG sector is experiencing renewed cost pressures with sugar prices touching new highs, along with sharp increases in key input costs including edible oils, coffee, cocoa and crude oil derivatives used in packaging. As reported by industry executives, geopolitical disruptions and supply concerns in global markets have further added to the pressure. While most companies have absorbed a significant portion of the inflation through cost-control initiatives and portfolio management, they remain focused on protecting volume growth even as margin pressures remain elevated. In August, the stock hit a three-year low before seeing some modest recovery in September, with surging key input prices including sugar, copra and palm oil sending the stock into a tailspin.
ITC Chief Executive Officer, Foods Division, and Executive Director Hemant Malik indicated the company would maintain prices through the festive season despite cost inflation. "We are attempting to hold prices," Malik said, noting that companies have been absorbing a large part of the increase in commodity prices through cost management initiatives and portfolio actions. However, he indicated that companies may have to revisit pricing decisions later in the financial year if cost pressures persist, suggesting potential price corrections in quarter three or quarter four. Most FMCG firms have implemented only modest price hikes of around 3-5% despite facing much higher cost increases. The Street remains worried that higher prices could result in a sharper decline in cigarette volumes, even as the company has been consistently raising prices across well-known brands in a staggered and phased manner.
Despite the significant stock decline, several brokerages maintain positive outlooks on ITC. 360 ONE Capital Research has maintained its 'buy' rating with an unchanged target price of ₹440 per share, believing the recent weakness has created an opportunity as the impact of cigarette price increases starts flowing through profitability. The brokerage expects support from FMCG, paperboards and packaging, agri and ITC's technology businesses. Nomura has also maintained its 'BUY' rating, noting that most raw material prices have either remained range-bound or softened month-on-month in September, though they remain up quarterly and yearly at levels materially above product price hikes taken by consumer companies in 1QFY27. HDFC Securities has maintained an 'ADD' call with a share price target of ₹300. The stock has been range-bound over the last two months, driven by uncertainties related to the impact of recent tax hikes on overall cigarette volumes, but analysts expect the pricing lever to have more weight than the volume lever in current industry dynamics.
As of Tuesday's close, ITC shares traded at ₹264.25, declining 0.4% or ₹0.95 during the session. The stock has shown consistent underperformance across multiple timeframes, with -0.90% in one week, -0.98% in one month, -27.61% year-to-date, -35.32% in one year, and -40.73% over three years. The weakness reflects ongoing concerns about the impact of higher taxation on the company's core cigarette business, compounded by recent cost inflation pressures across the FMCG sector. Sugar prices have corrected sharply, falling 8% month-on-month and 21% from their peak, but remain up 18% year-on-year, potentially pressuring margins for multiple FMCG companies including ITC.
