Shares of cigarette makes Godfrey Phillips, VST Industries and ITC ltd surged in Wednesday’s trading session after reports suggested price hikes across the product segment, boosting investor confidence in the sector’s revenue outlook.
The development follows the government’s notification ending the GST compensation cess and ininitiating a new tobacco tax regime from February 1moves that could reshape pricing dynamics across the sector.
Vinod Nair, Head of Research, Geojit Investments Ltd, said cigarette stocks have staged a strong rebound after companies implemented decisive price hikes to pass on the recent tax increases. The recovery comes after last month’s sharp correction, when the duty hike led to broad-based selling across the sector.
“With pricing adjustments now in place, near-term margin pressures appear more manageable. December-quarter results indicate that the earlier weakness was largely tax-driven rather than reflective of any structural slowdown in demand,” he said.
Stocks of Godfrey Phillips India led the rally, climbing 20 per cent to settle at ₹2,477.70 on the NSE after hitting the upper circuit of ₹2,478.90, compared with the previous close of ₹2,065.80.
The sharp rise reflected strong buying interest amid expectations that higher pricing could support margins despite regulatory pressures on the tobacco industry.
Meanwhile, VST Industries shares gained around 3 per cent to close at ₹246.48, reaching a high of ₹248.90 against the prior close of ₹239.65, and ITC Ltd ended 2 per cent positive at ₹332.45. Brokerage UBS has maintained a buy rating on ITC and trimmed its target price to ₹395.
While higher retail prices could temporarily weigh on volumes, cigarette companies have historically displayed strong pricing power, allowing them to protect profitability even in elevated tax regimes, said Nair. “The recent valuation correction may therefore present selective opportunities for investors, particularly in companies capable of sustaining margins and earnings through calibrated price actions,” he added.
Published on February 18, 2026