ITC shares fall heavily due to ‘smoking’! Lakhs of investors lost money due to a decision of the government, know what to do now? – ..

On the very first day of the new year, the shareholders of ITC, the country’s largest cigarette manufacturing company, got a big shock. Apart from GST, the government has announced to impose another new tax (Additional Excise Duty) on cigarettes and tobacco, which will be applicable from 1 February 2026.

After this announcement of the government, ITC shares went up in smoke in the stock market. On January 1, the share price fell almost 10% in a single day to ₹363.95, causing investors to lose millions of rupees.

Why did big experts reduce the rating of ITC?

After this ‘tax bomb’ of the government, big brokerage firms of the stock market (which do research on companies) like Motilal Oswal, Nuvama and JP Morgan have changed their opinion about ITC shares.

• Earlier: They were advising investors to ‘buy’.
• Now: They are saying ‘Hold/Neutral’, meaning now is not the time to buy.

Why are experts so scared?

1. Increase more than expected: Nuwama said, “We had an idea that the tax on cigarettes would increase, but we did not think that it would increase so much. This is a surprising increase.”
2. Cigarette prices will increase, sales will decrease: Experts believe that to avoid the burden of this new tax, ITC will have to increase the price of each cigarette by at least 25%.
3. Impact on profits: When cigarettes become so expensive, people will buy less of them, which will reduce both ITC’s cigarette sales (volume) and profits (EBITDA).

Due to this fear, brokerage firms have also reduced the price target of ITC shares:

• Nuvama: Reduced to ₹415 from ₹534.
• Motilal Oswal: Reduced to ₹400.
• JP Morgan: Cut to ₹375 from ₹475.

So what should investors do now?
JP Morgan believes that after this huge tax hike, it is very difficult for ITC stock to go up for the next 6 to 9 months. Experts advise to avoid making new investments in this stock right now and adopt the strategy of ‘Wait and Watch’.

However, some firms like UBS are still positive and have maintained ‘buy’ rating, but they have also reduced their price target to ₹430 from ₹490.

This case shows how a government decision can have a direct impact on the fortunes of a company and the money of millions of investors.