Sugar stocks such as Dalmia Bharat Sugar and Industries, Dwarikesh Sugar, Avadh Sugar & Energy rallied up to 20 per cent in Monday’s intraday offers on BSE. On World Environment Day, Prime Minister Narendra Modi mentioned the government has resolved to meet the target of 20 per cent ethanol blending in petrol by 2025. Currently, the ethanol blending level in petrol is about 8.5 per cent. “This can divert a sizable amount of sugarcane to ethanol production and reduce sugar production. This should essentially bode well for the sugar industry as the situation of a supply glut will automatically get addressed and will support pricing discipline in the industry in the long run,” Binod Modi, Head – Strategy, Reliance Securities, told TheSpuzz Online.
K.M.Sugar Mills shares cost surged 20 per cent, Dwarikesh Sugar Industries 16.12 per cent, Dhampur Sugar Mills 9.7 per cent, Avadh Sugar & Energy 18.34 per cent, Dalmia Bharat Sugar and Industries 18.67 per cent. Triveni Engineering & Industries stock soared 15.18 per cent and Balrampur Chini Mills 8.4 per cent in intraday session.
Under the Ethanol Blended Petrol (EBP) programme, the government has currently reintroduced the administered cost mechanism for ethanol procurement, enabling ethanol production from various feedstocks like heavy molasses, sugarcane juice, sugar, sugar syrup, broken meals grains, maize and surplus rice stocks with Food Corporation of India (FCI).
Apart from the news of India advancing its target of 20 per cent ethanol blending in petrol by 5 years, frantic obtaining in mid and smallcap stocks have led to a surge in the sugar stocks. “Technically, Dalmia Bharat Sugar and Industries, Dwarikesh Sugar Industries and Avadh Sugar & Energy are overbought and investors are best advised to book profits in their current buy positions and wait for a 25-30 per cent dip to buy,” AR Ramachandran, Co-founder & Trainer, Tips2Trades, told TheSpuzz Online.
A production shortage by substantial sugar-making nations such as Brazil has led to some momentum in sugar stocks. The rally got a additional push from the government’s choice to advance the deadline of reaching the 20 per cent ethanol blending target, mentioned an analyst. “From an industry perspective, this is a positive, especially for the companies with bigger capacities and strong balance sheets. That said, the cyclicality in the industry is not going to go away. As such, one should have a good understanding of the industry cycle and specific insights to consider sugar stocks from a long term perspective,” Richa Agarwal, Senior Research Analyst, Equitymaster, told TheSpuzz Online.
India’s sugar production rose by 13 per cent to 305.68 lakh tonnes in the 1st eight months of the existing advertising and marketing year ending September, mostly due to greater output in Maharashtra, according to the Indian Sugar Mills Association (ISMA). Sugar advertising and marketing year runs from October to September.
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