The Hindu Business Line : Sugar stocks ooze sweetness

Unlike the bearish trends in the sugar futures markets, prices of sugar stocks have already registered substantial appreciation in the last few weeks and there hardly seems to be any sign of correction.

In fact, analysts feel that these counters would continue to gain on the prices because future earnings of the producers are likely to grow further on the back of expanded capacities and higher price realisations.

Among the counters that have moved up in the past fortnight or so are stocks such as Bajaj Hindustan and Balrampur Chini. The former, which was at Rs 370 on February 15, closed at Rs 386.45 on March 3, while the latter, which was roughly at Rs 150 in mid-February, ended Friday's session at Rs 154.15.

A section of the sugar companies, including some of the leading names, are expected to perform well on the bourses in the days ahead, feels Mr Nilesh Shah, CIO, Prudential ICICI MF.

Crucial Period

"We have already seen how the sector has gained in the past one year or so, a trend that is reflected in the kind of buying specific stocks had recorded. Based on what has been achieved, the next few quarters will be important for the sugar industry," he said.

Marketmen allude to what many feel will soon be an important development: Capital mobilisation by sugar companies by way of public issues.

The trend, in fact, is said to have started with players like Triveni Engineering; the latter,despite its "engineering" tag, is a sugar producer as well. Others seemed to have implemented investor-friendly proposals like stock-splits. Balrampur Chini, for instance, is part of this category.

Says Mr Raamdeo Agrawal, Joint MD, Motilal Oswal Securitie: "The sector may yet see fresh developments...a number of players seem to be doing the right things." The reference is again to the rising production capacity and to the fact that the industry's export profile is improving.