Bihar sent shares in breweries and liquor firms down as much as 10 percent on Thursday after the country's third-most populous state said it was considering a ban on alcohol, prompting concerns that others could follow.
Chief Minister Nitish Kumar, who was re-elected this month after his anti-government alliance defeated Prime Minister Narendra Modi's Bharatiya Janata Party (BJP), told reporters the ban could come in effect from early next year.
Alcohol has been traditionally frowned upon in India for religious and cultural reasons, but a growing middle class has made the country a booming market for drinks makers, and only a handful of districts and states have an outright ban, including Gujarat, Modi's home state. The southern state of Kerala is introducing limits on alcohol sales.
Shares in United Spirits were down 4.5 percent at around 0945 GMT, while distiller Radico Khaitan was down 5.8 percent, against a 0.6 percent gain in the broader Mumbai market. United Breweries earlier dropped almost 3 percent, before recovering some lost ground.
"More than the obvious financial impact, this is a directional negative if rest of the state governments emulate Bihar and Kerala, in our view," analysts at brokerage house Motilal Oswal said.
Bihar has a population of around 100 million, more than Germany's. In the run-up to state elections, Kumar had reached out to women voters, who had led protests against rising alcohol consumption, promising them he would ban alcohol, if re-elected.
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