Why sugar stocks are up as much as 7 percent

Shares of prominent Indian sugar companies continued to display robust performance on September 25, surging by as much as 7 percent in trading. This surge was attributed to growing expectations of an increase in sugar prices in the near future.

As of 1:26 PM on the BSE (Bombay Stock Exchange), Balrampur Chini Mills Ltd saw its stock trading at Rs 440.80 per share, marking a 6.4 percent increase. Similarly, Dalmia Bharat Sugar and Industries Ltd witnessed a 6.87 percent rise, reaching Rs 457.35 per share. Dwarikesh Sugar Industries Ltd experienced a significant surge of 6.4 percent, with shares reaching Rs 107.15, while Uttam Sugar Mills Ltd also gained 6.55 percent, reaching Rs 439.85 per share.

Shree Renuka Sugars Ltd also displayed a positive trend, with shares trading 3.9 percent higher at Rs 56.39 per share. Avadh Sugar and Energy Ltd recorded a 4.5 percent increase, reaching Rs 690.85, and Dhampur Sugar Mills Ltd gained 4.2 percent, with shares reaching Rs 314. Triveni Engineering and Industries Ltd saw a 3.5 percent rise, reaching Rs 394.40, while Mawana Sugars Ltd experienced a 3.7 percent increase, with shares reaching Rs 114.50. EID Parry (India) Ltd inched up 1.5 percent, reaching Rs 542.30 per share.

This positive trend in sugar company stocks follows recent government orders mandating the disclosure of sugar stock positions for traders, wholesalers, retailers, big chain retailers, and sugar processors. This measure aims to proactively address hoarding and speculative practices in the sugar market. The government has specified that this information must be updated every Monday on the Department of Food and Public Distribution’s portal.

The move to implement these disclosure requirements comes in response  reports earlier this month indicating a potential shortage of sugar supply this year due to lower production. Switzerland-based trader Avlean also expressed concerns about the expected lower sugar production in India, the world’s second-largest sugar producer after Brazil, and projected a global sugar deficit of 5.4 million tonnes for the upcoming season.

In light of these developments, analysts at DAM Capital Advisors have predicted robust growth for sugar companies due to the anticipated increase in sugar prices resulting from supply shortages. They initiated coverage on four sugar companies—Balrampur Chini Mills Ltd, Triveni Engineering Industries Ltd, Dalmia Sugar, and Dwarikesh Sugar—and assigned a ‘buy’ rating to these stocks, with potential gains of up to 28 percent projected over the next 12 months.