Even as the market remained docile in trade on Monday, sugar stocks caught the fancy of investors. These stocks gained between 3 and 9 per cent in trade – Balrampur Chini Mills (9.5 per cent) was the best performer followed by Shree Renuka (4.5 per cent), Bajaj Hindusthan (3 per cent) and EID Parry (3 per cent).

So, why did sugar stocks suddenly turn sweet? Expectations that the country’s total sugar production in the current year may be lower by 5 per cent due to poor monsoon rains in key cane growing states such as Maharashtra was the principal reason.

The last few years witnessed bumper output but there is expectation that sugar production this year may slip below domestic consumption.

One other factor impacting domestic availability is exports. The country has been trying to export more sugar to reduce the domestic stockpile. So, exports coupled with lower crop output in the current fiscal may mean that the total sugar availability for domestic consumption may fall short, supporting the prices of sugar in the domestic market.

If this happens, it can provide some respite for the ailing sugar industry; sugar producers are currently bogged by high debt, cane arrears, high cane costs and low sugar realisation.

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