ITC Shares Fall 15% in 2026: Has the Dividend Stock Bottomed Out?

Summary

• ITC shares have fallen nearly 15% in early 2026 after a sharp excise duty hike on cigarettes
• Analysts remain cautious as the stock trades below key long-term technical levels
• Dividend yield remains attractive, but near-term price pressure persists
• Key support lies between ₹330 and ₹310, while recovery needs ₹360 plus levels
• Long-term investors should wait for stability before fresh entries

ITC Shares Fall 15% in 2026: Has the Dividend Stock Bottomed Out?

ITC has long been considered one of India’s most reliable dividend-paying stocks. However, 2026 has started on a difficult note for the FMCG and cigarette major. In just four trading sessions, ITC shares have fallen nearly 15%, hitting a fresh 52-week low near ₹338, following a sharp increase in cigarette excise duties announced by the government.

The sudden decline has raised a key question among investors: has ITC finally bottomed out, or is there more downside ahead? Let’s break down what is driving the fall, how analysts are reading the charts, and what this means for Indian investors.

Why Are ITC Shares Falling Sharply?

Government Excise Duty Hike on Cigarettes

The primary trigger behind ITC’s sell-off is the Central Excise Amendment Bill 2025, which was approved by Parliament in December. Under the new framework, cigarettes will attract excise duty over and above the existing 40% GST.

The notified excise duty ranges from ₹2,050 to ₹8,500 per 1,000 sticks, depending on cigarette length, and becomes effective from February 1, 2026.

Impact on ITC’s Core Business

Cigarettes remain ITC’s most profitable segment, contributing a disproportionate share of operating profits despite lower volume contribution. Analysts estimate that:

• Overall costs for popular cigarette sizes could rise by 22% to 28%
• Cigarettes longer than 75 mm, accounting for roughly 16% of volumes, may see price hikes of ₹2 to ₹3 per stick
• Higher prices could impact demand elasticity, especially in a slowing consumption environment

This regulatory move has revived concerns that cigarette profitability may come under sustained pressure, prompting heavy institutional selling.

How Severe Is the Market Reaction?

Massive Market Capitalisation Erosion

In just four sessions, ITC has lost nearly ₹82,000 crore in market value. Volumes surged sharply, suggesting forced selling rather than routine profit booking.

From a market behaviour perspective, such high-volume declines often indicate either panic-driven liquidation or capitulation, where weak hands exit en masse.

Dividend Comfort Versus Price Risk

Despite the sell-off, ITC’s dividend profile remains strong. In FY25, the company paid a total dividend of ₹14.35 per share. At current prices, the dividend yield stands close to 4.1%.

However, history shows that dividend yield alone does not protect stocks from regulatory shocks, especially in sectors like tobacco.

ITC Technical Outlook: Key Levels to Watch

Current Trend Structure

ITC is currently trading below all major moving averages including the 20, 50, 100, and 200-day EMAs. This confirms a clear downtrend across short-term and medium-term timeframes.

The stock has also slipped below its long-term support zone near ₹380 to ₹400, which had held for several years.

Support and Resistance Zones

• Immediate support lies between ₹330 and ₹340
• A decisive breakdown below ₹328 could open the door to ₹310 or even ₹300
• On the upside, ₹360 is the first hurdle
• A stronger recovery signal would only emerge above ₹390 to ₹400

Momentum indicators like RSI remain deeply oversold, but oversold conditions alone do not guarantee a reversal.

Is This a Capitulation Bottom or a Value Trap?

Arguments Supporting a Potential Bottom

• Extremely high volumes indicate exhaustion selling
• Monthly charts show one of the deepest declines since the COVID crash
• Heavy derivative positioning around ₹330 suggests defensive accumulation

Such conditions often precede a period of consolidation, rather than immediate further collapse.

Risks That Still Remain

• Regulatory uncertainty in the tobacco sector remains elevated
• Cost pressures may not be fully priced in yet
• Any further tax or compliance tightening could prolong weakness
• Broader market sentiment could impact defensive stocks like ITC

From a risk-reward standpoint, this phase favours patience rather than aggressive buying.

What Should Different Types of Investors Do?

Long-Term Dividend Investors

If you already hold ITC for income, there is no immediate need to panic. However, fresh accumulation should ideally wait until price stability and base formation become visible.

Short-Term Traders

Momentum remains negative. Until ITC reclaims ₹360 with strong volumes, short-term trades carry elevated risk.

SIP and Conservative Investors

Staggered buying near strong supports, only after confirmation, may offer better risk-adjusted returns than lump-sum investments.

Broader Impact on Indian Markets

The ITC episode highlights how policy risk remains a major factor in Indian equity markets, especially for sin sectors like tobacco, alcohol, and mining.

It also reinforces the importance of diversification. Even traditionally defensive stocks can witness sharp drawdowns when regulatory frameworks change abruptly.

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Frequently Asked Questions

Why did ITC shares fall so sharply in 2026?

The fall was triggered by a sharp increase in cigarette excise duties, raising concerns about profitability and demand impact.

Is ITC still a good dividend stock?

ITC continues to offer a strong dividend yield, but dividend strength alone may not offset near-term price volatility.

What is the next major support level for ITC?

The key support zone lies between ₹330 and ₹310. A breakdown below this range could increase downside risk.

Has ITC formed a bottom?

There are signs of selling exhaustion, but confirmation of a bottom requires price stability and recovery above ₹360.

Should investors buy ITC at current levels?

Most analysts advise caution and recommend waiting for consolidation or confirmation before fresh entries.

Final Takeaway

ITC’s sharp correction in early 2026 is a reminder that even blue-chip dividend stocks are not immune to regulatory shocks. While the long-term business remains resilient, the near-term trend remains fragile.

Investors should focus on disciplined risk management, clear entry levels, and reliable research support rather than reacting emotionally to sharp price moves.

For structured investing, research-backed insights, and tech-enabled trading, Swastika Investmart remains a trusted partner for Indian investors navigating evolving market cycles.