The Hindu Business Line : Sugar stocks gain on low production estimates

Mumbai, Jan. 9 Sugar stocks are moving up in full steam due to low production estimates for the year. According to a recent report by Kotak Commodities Services Ltd, delay in crushing activity in Maharashtra and Uttar Pradesh has also forced a revision in overall sugar production numbers.

“This delay seems to have taken away almost half million tonne of production of sugar as of now. There were estimates of our country producing close to 30 million tonnes (MT) but now due to the delay we could see a much lesser amount of sugar being produced,” said an analyst.

Economic demand

Buying enquiries from the retail segment and bulk manufacturers also helped bullish sentiments, added the report. Prices of most sugar sector stocks have been increasing for the past few days.

Among the stocks that have seen a rise in price include: Bajaj Hindusthan Sugar & Industries (4.92 per cent), Bannari Amman (8.36 per cent), Sakthi Sugars (17.29) and Shree Renuka Sugars (12.69 per cent).

Other stocks that surged ahead today include: Gulshan Sugars and Chemicals Ltd, Uttam Sugar Mills and Vishnu Sugar Mills. “What is beneficial for sugar stocks is the increase in domestic sugar prices and the fact that the demand for sugar has been picking up. We could expect the sugar prices to reach Rs 1,600 or even Rs 1,650,” said an analyst with a brokerage.

Buffer stock

The report by Kotak Commodities also mentioned that sugar is expected to climb in the international markets as countries are now trying to reduce their dependence on fossil fuels as crude oil prices are surging to record levels.

The sugar prices for January delivery rose by two per cent to Rs 1,437 on NCDEX.

Market watchers feel that soon the sugar prices will stabilise at the current levels as the Government might let out the buffer stock so as to do something about the disparity between the excess demand and the estimated supply of sugar.

“Low production coupled with export of sugar would see the share prices of these sugar stocks rising for sometime.

"We will have to wait till maybe March to see what exactly will be the impact of the delay in production as it is in March that the sugar companies will be going ahead with production in full swing usually. As of now this sector seems to be bottoming up itself,” said a wholesale sugar broker.