Indian stock markets especially those connected with tobacco products had witnessed a major fall yesterday. This has seen the shares of ITC going down by 15% during the intra day trade wiping out Rs 49,731 crore in a single day. All thanks to GST which has raised the cess on cigarettes to discourage users.
Shares of ITC tumbled 12.63 per cent to close at Rs 284.60 on BSE. During the day, the stock dived 14.99 per cent to Rs 276.90.
At NSE, shares of the company plunged 12.48 per cent to end at Rs 284.55.
“This will impact the earnings of the cigarette companies as companies will either absorb the tax impact or see some drop in volumes if they hike the price,” Angel Broking said in a report.
“GST cess on cigarettes dented Nifty’s surge, while global markets and the uncertainties prevailing around the earnings season kept the domestic investors cautious today,” said Anand James, chief market strategist, Geojit Financial Services Ltd.
The major fall in the valuation has affected the Government of India and few other insurance companies which has considerable stake in the company. LIC has 16.29% and UTI has 9.09%
The loss suffered by the Government is pegged at Rs.15,000 crores.
Despite the increase in CESS, the rates of cigarettes will not increase any further.