Mumbai, Mar 1: Led by ITC, cigarette stocks today surged by up to 9 per cent despite a hike in excise duty on tobacco products.
Shares of ITC surged 9 per cent to Rs 322.60 on BSE. The stock was the biggest gainer among the 30-Sensex blue-chips.
Other cigarette stocks also attracted buying, with Godfrey Phillips trading higher by 3.47 per cent, Golden Tobacco 2.82 per cent and VST Industries 2.61 per cent. In the previous session also, cigarette stocks had recovered after falling sharply 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. Excise duty on cigarettes was yesterday hiked for the 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 per cent," said Finance Minister Arun Jaitley while presenting the Budget for 2016-17.
Last year, in the Budget, the government had increased excise duty on cigarettes by 25 per cent for cigarettes of length not exceeding 65 mm and by 15 per cent for cigarettes of other lengths, citing need for promotion of public health.