Sugar stocks shed one to five per cent on expectation of further erosion in operating margins over 12-18 months.

Balrampur Chini shed 4.78 per cent, Shree Renuka Sugars 2.24 per cent, Bajaj Hindusthan 3.08 per cent, EID Parry 0.94 per cent, Dhampur Sugar, 1.42 per cent and Dwarikesh Sugar 0.86 per cent on the BSE.

“This is a knee-jerk reaction to the Government's policy stance of extending the deadline for tax-free import of sugar to end-June,” said Mr Kishor Ostwal, CMD, CNI Research “When sugar exports were allowed recently, many had started building long positions and the market simply reacted to this policy stance.”

Excess supply

Marketmen said that there had been an over supply of sugar and despite that the acreage across the country increased by two per cent.

“With realisation per kg equalling that of wheat there is surely a mismatch, either wheat is over priced or sugar is under priced,” said the Head of Research of an Indian brokerage. Experts said that farmers in Uttar Pradesh, India's second largest sugar producing State, chose to increase their area under cultivation by four per cent in spite of Rs 4,500-crore outstanding to cane farmers last season.

“Higher minimum support prices, use of drip irrigation, better yield and faster turn around time from sowing to harvesting and the expectation of a fourth consecutive bumper crop have prompted farmers to go with sugarcane,” said a sugar sector analyst with an Indian brokerage.

In 2011-12, India produced 26 million tonnes and consumed 22 million tonnes.

Analysts expect 24 to 25 million tonnes this year and are sure that India will remain sugar surplus.

“With Brazil expecting another bumper crop from sugar cane and sugar beet and crude showing signs of softening (hence less ethanol is required for blending — ethanol is made from sugarcane molasses), it remains to be seen how this impacts sugar stocks,” said an analyst.

>raghavendrarao.k@thehindu.co.in

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