Removal of inventory limits boosts sugar stocks

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Mumbai | Published: December 20, 2017 2:32:24 AM

The stockholding limit currently for traders is 500 tonne. The limit usually reduces the buying interest of the traders. Abinash Verma, director general of Indian Sugar Mills Association (ISMA), explained that earlier the traders were not supposed to keep more than 500 tonne.

Sugar stocks had a sweet Tuesday, ending the session with gains of up to 14%, following the government’s move to withdraw stock holding and turnover limits on dealers of sugar with immediate effect.

Sugar stocks had a sweet Tuesday, ending the session with gains of up to 14%, following the government’s move to withdraw stock holding and turnover limits on dealers of sugar with immediate effect. Mawana Sugars led the rally, closing the session 13.04% higher at Rs 79.75 a share. Kesar Enterprises, Shree Renuka Sugars, Simbhaoli Sugars and Balrampur Chini Mills were the other gainers. The stockholding limit currently for traders is 500 tonne. The limit usually reduces the buying interest of the traders. Abinash Verma, director general of Indian Sugar Mills Association (ISMA), explained that earlier the traders were not supposed to keep more than 500 tonne. “Now that the stock holding limit has been removed, people will obviously buy. The extra buying will happen now and I expect this pipeline to be around 10 to 15 lakh tonne on an ideal basis. This brings some extra demand. That demand will be in addition to our usual consumption requirement,” said Abinash.

Analysts said that there has been a correction of almost Rs 2-4 per kg. “With the announcement of the withdrawal of stock holding and turnover limits on the dealers of sugar, it will assist in supporting the sugar prices,” said an analyst. “Also as the new supply has come in, the older inventory is getting liquidated, which is likely to result in gains on cost,” an analyst explained. Abinash added that the last year’s production was the lowest in the last six years. “There has been an increase in production this year. This year’s production is matching the consumption requirement, which makes this year a balanced year,” said Abinash.

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