The Hindu Business Line : Sugar stocks stay firm; withstand market fall

Mumbai, Feb. 22 Sugar company stocks on the BSE seem to have survived the market crash over the last one week. Though the bellwether Sensex has lost about four per cent, sugar stocks have managed to hold fort and post impressive gains.

Over the week, Bajaj Hindustan has gained 7.68 per cent to Rs 259, Shree Renuka Sugar 18.90 per cent to Rs 1,070, Bannari Amman Sugar 8.91 per cent to Rs 953, Balrampur Chini 5.25 per cent to Rs 95, Dhampur Sugars 5 per cent to Rs 65, Thiru Arooran 2.43 per cent to Rs 97 and Triveni Engineering 2.84 per cent to Rs 132.

However, most of these stocks aped the bearish sentiment on Friday. Sensex plunged 386 points to 17,349.

“The recent rise in international sugar prices has triggered interest in sugar stocks. The demand for ethanol produced by sugar mills will be in much demand with the soaring crude prices,” said an analyst.

Production estimate

Sugar production in India, the world’s second-largest producer of the sweetener, is expected to have fallen by 9-lakh tonnes in the first quarter of 2007-08 season due to delay in start of sugarcane crushing by the mills. The total sugar production is estimated at 6.4 million tonnes (mt) during October-December of 2007-08 season, compared with 7.3 mt during the same period of the previous season.

The production may further fall in the coming months and it may fall below 27 mt at the end of this season. A decline in production may push up prices in the domestic markets, said an analyst.

The industry had first pegged the production figure for 2007-08 season at 34 mt, which was later reduced to 30-31 mt in December.

Now, Indian Sugar Mills Association says the output may fall to 27 mt, well below the previous year’s level of 28.3 mt. The mill gate price of sugar was hovering around Rs 14,500 per tonne last week against Rs 13,500 a tonne in January.

The retail price also has increased by Re one per kg to Rs 17 per kg in many places in the last two months.

Moreover, the recent Supreme Court order urging the Government of Uttar Pradesh, the country’s second largest sugar producer, not to take coercive action against private millers with cane arrears for 2006-07 season has worked in favour of sugar company stocks.

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