Shares of major cigarette companies, including ITC and Godfrey Phillips India, experienced a significant increase on February 6, 2026, with some stocks rising by more than 11%.
This growth comes after a period of decline in early December 2025, following the government’s decision to raise excise duties on cigarettes and related products. Experts believe that renewed investor interest, strong quarterly financial reports, and value buying are driving the current positive trend in these stocks.
Tobacco Stocks Recover After Taxation Impact
The cigarette industry faced a major downturn in December 2025 after Parliament passed the Central Excise (Amendment) Bill, 2025.
The new rules introduced higher excise duties on cigarettes, which were added to the existing 40% Goods and Services Tax (GST) on the product. The new excise duty, which varies from ₹2,050 to ₹8,500 per 1,000 cigarettes based on their length, came into effect from February 1, 2026.
Following the initial drop in stock prices due to concerns over taxation, investors have started returning to these stocks, seeing the decline as an opportunity.
Analysts point out that cigarette companies have historically managed tax increases by adjusting their pricing, which has helped rebuild investor confidence.
Godfrey Phillips Shares Lead the Rally
Godfrey Phillips India was among the top performers, with its stock rising by more than 11% during the trading session.
This was largely driven by the company’s strong third-quarter results for the financial year 2025-26.
The company showed an 8.7% increase in consolidated net profit, reaching ₹343.29 crore compared to ₹315.84 crore during the same quarter last year.
Revenue from operations also grew by 15.68%, reaching ₹2,189.93 crore. Total income, including other revenue streams, increased by 15.2%, reaching ₹2,234.51 crore.
Godfrey Phillips produces several well-known cigarette brands such as Four Square, Red and White, Cavanders, Tipper, and North Pole.
It also distributes Marlboro cigarettes under a licensing agreement with Philip Morris. The anticipation around the upcoming financial results of its parent company, Philip Morris, further boosted investor confidence.
ITC Shares Rise on Strong Results
ITC shares also saw significant buying interest, rising around 5% and becoming one of the top-performing stocks in the Nifty index.
The company reported a slight increase in net profit, reaching ₹5,018 crore in the December quarter. Its revenue from operations increased to ₹21,707 crore, up from ₹20,350 crore in the same period last year.
ITC continues to benefit from steady demand for cigarettes in India despite increasing regulatory pressure.
Revenue from its cigarette segment, which remains its largest business, grew by about 8% in the third quarter.
In addition to tobacco, ITC’s fast-moving consumer goods (FMCG) segment also showed strong growth.
Popular brands such as Aashirvaad flour, Sunfeast biscuits, and Yippee noodles contributed to an 11% growth in the company’s consumer goods business. This diversified approach helps ITC maintain consistent revenue growth even when tobacco profits are under pressure.
Value Buying and Optimistic Sentiment
Market analysts suggest that the sharp recovery in cigarette stocks is largely due to value buying.
Investors often buy stocks that are undervalued due to policy changes or temporary market conditions. The continued demand for cigarettes, coupled with strong financial performance, has helped restore confidence in tobacco companies.
The Nifty FMCG index also performed well, showing positive sentiment across the consumer goods sector, with ITC leading the rise.
Challenges Remain in the Industry
Despite the recent increase, cigarette companies still face several challenges, including rising taxation, regulatory policies, and increased public awareness about the health risks of smoking.
Additionally, higher prices for tobacco leaves in recent quarters have driven up production costs, potentially affecting profit margins.
However, strong brand loyalty, stable domestic demand, and flexible pricing strategies continue to support the industry’s performance.
Looking Ahead for Tobacco Sector Stocks
The recent rise in the shares of ITC and Godfrey Phillips indicates that investors still believe in the long-term stability of major cigarette manufacturers.
Although regulatory challenges persist, strong earnings growth, a diversified business model, and consistent consumer demand continue to support the sector.
The future performance of these stocks will depend on taxation policies, global trends in tobacco demand, and the strategic growth efforts of the companies.
Investors are likely to keep a close eye on quarterly financial reports and regulatory developments to assess the long-term investment potential of the sector.