ITC Shares

Life Insurance Corporation of India (LIC) has suffered a notional loss of over ₹11,400 crore in just two trading sessions after shares of ITC Ltd slumped nearly 14% following a sharp hike in excise duty on tobacco products announced by the government.

ITC shares fell to their lowest level in nearly three years, wiping out around ₹72,300 crore in market capitalisation and dealing a significant blow to large institutional shareholders. LIC, India’s largest domestic institutional investor, holds 19.86 crore shares in ITC, representing a 15.86% stake as of the September quarter, making it one of the biggest losers from the stock’s sharp correction.

The sell-off was triggered after the finance ministry late Wednesday announced a steep increase in excise duty on cigarettes, ranging from ₹2,050 to ₹8,500 per 1,000 sticks depending on length. The new duty will come into effect from February 1 and will be in addition to the higher 40% goods and services tax (GST) rate applicable on tobacco products.

Market participants believe the higher tax burden will pressure cigarette manufacturers to raise prices, potentially impacting volumes and near-term earnings. Analysts at Morgan Stanley, cited in a Reuters report, said cigarette prices may need to increase by as much as 40% to fully pass on the impact of the higher levies to consumers.

Following the announcement, at least 11 brokerages, including Goldman Sachs, JPMorgan and Morgan Stanley, downgraded ITC’s stock. Domestic brokerage Nuvama Institutional Equities cut its EBITDA estimates by 7% for FY27 and FY28 and downgraded the stock to ‘Hold’ with a target price of ₹415.

The sharp reaction highlights investor sensitivity to policy risks in tobacco-linked stocks and the outsized impact on institutional portfolios such as LIC’s.

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