Honestly, if you've been checking your portfolio lately and staring at that red line next to the ITC share price, you aren't alone. It’s been a rough start to 2026. After ending last year on a relatively stable note around ₹403, the stock took a massive nose dive. We are talking about a sharp 15% drop in just the first couple of weeks of January. As of January 17, 2026, the price is hovering around ₹329.
That’s a big deal for a Nifty 50 heavyweight. People usually buy ITC for the "sleep well at night" factor and those juicy dividends. But right now? The market feels like it’s waking up from a bad dream. The culprit isn't a secret: a massive government-imposed excise duty hike on cigarettes that kicked in this month.
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The "Tax Shock" of 2026: Is it really a dealbreaker?
Starting February 1, 2026, cigarette makers have to shell out between ₹2,050 and ₹8,500 per 1,000 sticks, depending on the size. When you stack that on top of the existing 40% GST, you're looking at a total tax burden that makes up roughly 53% of the retail price.
Naturally, the market panicked. High taxes usually mean higher prices for consumers, which leads to lower volumes. Or, if ITC decides to absorb the cost, their margins get squeezed. Analysts at Investec and ICICI Securities already slashed their targets. ICICI Securities, for instance, dropped their target to ₹385 from a much loftier ₹450 earlier this month.
But here is the thing. ITC has seen this movie before. They are the masters of "price-volume-value rebalancing." Basically, they are very good at raising prices just enough to keep the money flowing without scaring off every smoker in the country.
Life after the Hotels: The "New" ITC
Remember when everyone was obsessed with the hotel demerger? Well, that’s done. ITC Hotels Limited is now its own thing, trading separately around ₹194. If you held 10 shares of the parent company, you got one share of the hotel business for free.
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The parent company still keeps a 40% stake, but for the ITC share price on the main exchange, this move was about "unlocking value." By shedding the capital-heavy hotel business—which used up a ton of cash but only brought in about 3% of revenue—ITC is trying to prove it's a lean, mean FMCG machine.
How the segments are actually doing:
- Cigarettes: Revenue grew about 6.8% YoY in the last quarter. Even with the tax hike, it remains the cash cow that funds everything else.
- FMCG Others: This is where the real "boring" growth happens. Brands like Aashirvaad and Sunfeast are holding steady, with segment revenue up about 8% if you ignore the notebook business which is currently fighting off cheap imports.
- Agri-Business: This one is a bit of a wild card. Revenue was down nearly 31% recently because of export restrictions and some weirdness with US tariffs, but their margins actually improved to 11.5%.
- Paperboards: Struggling. Cheap imports from China and ASEAN countries have made life difficult, leading to a nearly 38% drop in segment results.
The Dividend Safety Net
If you're an income investor, the recent price drop actually pushed the dividend yield up to a very tempting 4.3% to 4.5%. ITC has a payout ratio of over 90%, which is basically their way of saying, "We don't have many better places to put this cash, so here you go."
The next big date to circle on your calendar is February 12, 2026. That’s the ex-dividend date for an expected payout of ₹6.50 per share. For many long-term holders, these payouts are the only reason they don't hit the "sell" button when the taxman comes knocking.
What the "Smart Money" is doing
Is the stock undervalued? Alpha Spread puts the intrinsic value at roughly ₹345, which means at ₹329, it's trading at a slight discount. Wall Street (and Dalal Street) consensus is still cautiously optimistic, with an average 1-year target of ₹432.
But there is a catch. The "tax shock" might affect earnings for FY27 and beyond. If the volume drop is worse than expected, that ₹329 support level might turn into a ceiling rather than a floor.
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Actionable Insights for Your Portfolio
So, what do you actually do with this information?
- Watch the Volume, Not Just Revenue: In the next quarterly report (expected around January 29-30), look for the volume growth in cigarettes. If revenue is up but volume is down double-digits, the tax hike is hurting more than they're admitting.
- Dividend Reinvestment: If you are in it for the long haul, this price dip is a classic opportunity to "DRIP" (Dividend Reinvestment Plan). Buying more shares at ₹329 with the February dividend effectively lowers your average cost.
- The ₹320 Floor: Technical analysts are watching the ₹320 to ₹325 range closely. If it breaks below that, we could see another leg down toward ₹300. If it holds, it might be the "bottom" for 2026.
- Monitor FMCG Margins: For ITC to truly de-rate from being a "tobacco stock" to a "consumer goods stock," their FMCG margins need to move from the current ~7-8% toward the 15-20% range seen by rivals like HUL or Nestle.
The ITC share price is currently caught between a rock (high taxes) and a hard place (global economic uncertainty). It's not a "get rich quick" play, but for those who value steady checks and a diversified business, the 2026 panic might just be a loud entry signal in disguise.
To keep a close eye on the situation, you should track the upcoming Q3 FY26 results and the specific management commentary regarding the impact of the February excise changes.