New Delhi, February 18 Shares of cigarette and tobacco product manufacturers ITC, Godfrey Phillips India, and VST Industries rallied by 20% on Wednesday, amid reports that the companies had raised cigarette prices to offset the recent increase in excise duties.
Godfrey Phillips India's stock surged by 19.93% to close at Rs 2,479.75 per share on the BSE. During the session, it reached an intraday high of Rs 2,481.30 – also its upper price band – on the exchange.
The stock of VST Industries rose by 2.97% to settle at Rs 246.55, while conglomerate ITC extended its gains for the third consecutive session, rising by 2.21% to end at Rs 332.50 per share.
"Cigarette stocks have staged a strong rebound after companies implemented decisive price hikes to pass on the recent tax increases. The recovery comes after last month's sharp correction, when the duty hike led to broad-based selling across the sector," Vinod Nair, Head of Research, Geojit Investments Ltd, said.
He added that the December-quarter results indicated that the earlier weakness was largely tax-driven rather than reflective of any structural slowdown in demand.
"While higher retail prices could temporarily weigh on volumes, cigarette companies have historically displayed strong pricing power, allowing them to protect profitability even in elevated tax regimes," Nair said.
According to reports, leading cigarette makers Godfrey Phillips and ITC have raised prices of their key brands to absorb the impact of higher excise duties.
The government has recently increased the Goods and Services Tax (GST) on tobacco products to 40% from 28%, along with additional excise duty effective February 1.
The markets ended in the green, with the 30-share BSE Sensex jumping 283.29 points, or 0.34%, to settle at 83,734.25.
