Sugar stocks in that sweet spot

By: | Published: November 18, 2015 12:10 AM

Shares of sugar companies touched their 52-week high level on Tuesday on expectations that shortage in sugar supplies globally will aid domestic sugar prices...

Shares of sugar companies touched their 52-week high level on Tuesday on expectations that shortage in sugar supplies globally will aid domestic sugar prices and increase realisation. Scrips of 11 sugar companies ended at their upper price limit on Tuesday and stocks like Dharani Sugars, Balrampur Chini, Sakthi Sugars and Dwarikesh Sugar touched their one-year high.

Narendra Murkumbi, vice-chairman and MD of Shree Renuka Sugars, reiterated that 2016 seems to be a deficit year for sugar in the world market. “The futures market is already signalling that kind of change in the fundamentals. We have an overhang of about 3 million tonne of stocks…” he said.

Shares of EID-Parry climbed 9.33% during the session. Scrips of the company have gained more than 20% during the last four sessions. Balrampur Chini — another major sugar company — rallied 18% during the same period.

ICRA expects domestic sugar production to decline to 7.6 million tonne in 2015-16, down from 10.1 million tonne in 2014-15. Further, due to increase in fair and remunerative price of cane and the absence of linkage of cane rates to sugar and by-product realisation in the state advisory price adhering states, the profitability and debt coverage of sugar mills would continue to be under stress in near term resulting in continued dependence on government support to clear cane arrears to farmers.

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