Source TOI
Indian cigarette and tobacco stocks witnessed a sharp surge in trading sessions, with investors rushing to buy into the sector amid expectations of stable taxation and resilient consumption demand. Shares of ITC Limited and Godfrey Phillips India jumped significantly, leading gains across the FMCG and defensive segments on the domestic stock exchanges.
Market analysts attribute the rally to optimism that the government may avoid steep tax hikes on cigarettes in the upcoming fiscal policy discussions. Historically, tobacco companies have faced periodic tax increases, but recent signals suggesting a more predictable tax regime have improved investor sentiment. The cigarette segment remains the most profitable vertical for these companies, contributing a major portion of earnings despite diversification into hotels, foods, and lifestyle products.
Traders also pointed to steady volume growth in premium cigarette categories and improved rural consumption patterns. With inflation moderating and disposable incomes stabilising, demand for discretionary FMCG products — including tobacco — has shown resilience even in uncertain economic conditions.
Brokerages have turned cautiously bullish on the sector, citing strong cash flows, high dividend payouts, and pricing power. Tobacco firms typically pass tax increases on to consumers without major demand destruction, making them attractive defensive bets during volatile markets.
The rally in tobacco counters also lifted the broader FMCG index, reflecting renewed investor interest in high-margin consumption plays. However, experts warn that regulatory risks remain a long-term overhang, as public health policies and taxation decisions continue to play a crucial role in determining the sector’s outlook.
For now, the market mood around cigarette stocks remains upbeat, with investors betting on policy stability and consistent earnings growth in the near term.
