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ITC Shares Drop After India Increases Cigarette Tax (Update2) 

ITC Ltd., India's biggest tobacco company, fell the most in three weeks in Mumbai trading after the government increased cigarette taxes, prompting brokerages to downgrade the stock.

Shares of Kolkata-based ITC fell 4.5 percent to 193 rupees on the Bombay Stock Exchange today, their biggest one-day decline since Feb. 11.

UBS AG cut its forecasts on cigarette volumes in India saying they will probably fall 2.5 percent in the year through March 2009, compared with the earlier estimated gain of 4 percent, after the government at least doubled the excise tax on non- filter cigarettes. The increase in overall weighted duty for ITC is equal to about 16 percent, Citigroup Inc. said.

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