India: Cigarette Companies Gain Ground Despite Duty Hike, ITC Surges 10%

Source from:  DNA 03/02/2016

Led by ITC, cigarette stocks on Tuesday surged by up to 10% despite a hike in excise duty on tobacco products.

Shares of ITC zoomed 9.91% to settle at Rs 325.10 on BSE. During the day, it jumped 10.54% to Rs 327.

The stock was the biggest gainer among the Sensex and Nifty blue-chips.

Other cigarette stocks also attracted buying, with Godfrey Phillips surging 9.86%, VST Industries 3.03% and Golden Tobacco 2.82%.

In the previous session also, cigarette stocks recovered after falling sharply in intra-day on the excise duty hike announcement.

"The hike in excise duty on tobacco products has been less aggressive than in the previous two years. We had anticipated some hike in excise duty on cigarettes. In our view, cigarette manufacturers would pass on the hike in the duty to consumers," Angel Broking said in a report.

The broader market also saw hectic buying, with the Sensex surging 777.35 points to end at 23,779.35.

Excise duty on cigarettes was yesterday hiked for fifth year in a row as the government continued the crack down on consumption of tobacco and allied products.

"To discourage consumption of tobacco and tobacco products, I propose to increase the excise duties on various tobacco products other than beedi by about 10-15%," Finance Minister Arun Jaitley said while presenting the Budget 2016-17.

Last year, in the Budget, the government had increased the excise duty by 25% for cigarettes of length not exceeding 65 mm and by 15% for cigarettes of other lengths, citing need for promotion of public health. Enditem