Why ITC Shares Are Slipping: A Detailed Market Insight

ITC has been under heavy pressure recently, delivering one of its worst share price performances in years. After outperforming many peers in 2025, the stock plunged 5% sharply to fresh 52-week low on multiple rating downgrades. Let’s unpack the key reasons with quantifiable context.

1. Government-Led Tax Shock Hits Core Business

The most immediate and powerful driver of the fall is regulatory change. On 1st January, 2026, the Government of India announced higher excise duties on cigarettes and other tobacco products, effective February 1, 2026. The new duty ranges from ₹2,050 to ₹8,500 per 1,000 cigarettes, based on length — on top of the existing 40% GST.

With this announcement, ITC shares fell as much as ~10% intraday, touching ₹362.70, the lowest since early 2023. In a single day alone, the stock lost over ₹50,000 crore in market cap.

Why this matters:

• Cigarettes account for a large share of ITC’s revenue which is estimated about 48% of the company’s cigarette business top line in recent quarters.
• Higher taxes likely mean price increases of 20–30% or more. Several brokerages project price hikes of 20–50% across categories to maintain margins.
• Price hikes often dampen volume demand, especially in price-sensitive markets.

This has ultimately resulted in investors fear lower volumes, compressed earnings, and a prolonged earnings recovery cycle.

2. Broker Downgrades & Target Price Cuts

Weak fundamentals triggered by tax changes have led to serious re-evaluations by analysts and brokerages:

• JPMorgan downgraded ITC from Overweight to Neutral and cut target from ₹475 to ₹375.
• Nuvama cut its target to ₹415 from ₹534 and changed the rating to Hold.
• Emkay lowered its call from Add to Reduce, trimming targets and earnings estimates.

These widespread downgrades further weaken investor confidence and reduce buy-side demand.

3. Technical Weakness Adds to Selling Pressure

Technical indicators show that ITC’s price is trading below major moving averages — including 5-, 20-, and 50-day lines — a bearish sign that amplifies short-term selling.

Comparatively, the broader market indices (e.g., BSE Sensex) have shown relative strength, indicating that ITC’s decline is stock-specific rather than a broad market downturn.

4. Long-Term Downtrend & Investor Sentiment Shift

Even before the latest slide, ITC has shown weakening returns:

Performance Metrics (as of early 2026):

• 1-Year return: 28.4%
• 3-Month return: 13.7%
• 1-Month return: down 12.7%

This persistent underperformance vs. broader indices suggests falling investor conviction over time.

What This Means for Investors

Key takeaways for stakeholders:

• Regulatory risk has moved front and centre — cigarette taxation now directly affects ITC’s core profit engine.
• Broader investor sentiment is cautious, reflected in valuation cuts and downgrades.
• Unless policy clarity or relief arrives in the Union Budget or through tax modifications, volatility is likely to persist.

In conclusion, what began as headline news (a major tax overhaul) has cascaded into earnings concerns, broker downgrades, negative technical signals, and heavy selling, pushing ITC to multi-year lows and challenging one of India’s market stalwarts.