ITC Shares Rally as Cigarette Volumes Defy Tax Hikes

Shares of ITC Limited rose between 3% and 4% on August 3, 2026, reaching their highest levels since June 23. The rally occurred despite the company reporting a 27% year-on-year decline in standalone net profit to approximately ₹3,579 crore for the first quarter of FY27. Revenue from operations grew 28% to ₹26,943 crore, fueled by an 81% surge in cigarette business revenue.

Investors reacted positively to data showing that cigarette volumes declined by only 5%, outperforming analyst expectations of a 10% drop. This resilience follows a February tax hike by the Government of India, which implemented a flat 40% GST and a new excise duty ranging from ₹2,050 to ₹8,500 per 1,000 sticks. Brokerages including Nomura, Jefferies, and HSBC noted that ITC's staggered pricing strategy protected its market share and limited the shift toward illicit trade.

Following the report, Nomura upgraded ITC to a Buy rating with a target price of ₹340, stating that the worst of the tax impact appears to be over. While firms like JM Financial and CLSA highlighted the resilience of the cigarette segment and growth in non-cigarette FMCG business, Motilal Oswal remained cautious. The firm cited ongoing competition from illicit cigarettes and the delayed pass-through of tax costs to consumers as remaining risks.