Tobacco Stocks Soar on Price Hike Reports

New Delhi, Feb 18 (PTI) Shares of cigarette and tobacco product makers ITC, Godfrey Phillips India and VST Industries rallied 20 per cent on Wednesday, amid reports that the companies have raised cigarette prices to offset the recent hike in excise duties.

Godfrey Phillips India's stock surged 19.93 per cent to close at Rs 2,479.75 apiece on the BSE. During the session, it hit an intraday high of Rs 2,481.30 -- also its upper price band -- on the bourse.

The stock of VST Industries rose 2.97 per cent to settle at Rs 246.55, while conglomerate ITC extended gains for the third consecutive session, rising 2.21 per cent to end at Rs 332.50 per piece.

"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 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 per cent from 28 per cent, 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 per cent, to settle at 83,734.25.