Sugar stocks sweeten gains on talk of supply shortages in key states
sugar companies were among the top gainers on Thursday on expectations that prices would firm up on supply shortages in key states like Maharashtra and Karnataka.
Out of the 35 sugar stocks on the BSE, 30 rallied in Thursday's trade. Avadh Sugar soared 13.20%, Magadh Sugar jumped 12.8% and DCM Shriram rose 10%.
Analysts expect further upside in some of these stocks.
«The sugar stocks have mostly seen consolidation in the last six months, but have posted good results recently,» said Dharmesh Shah, technical analyst at ICICI Securities. «So we now expect a technical upside of 5-10% in these stocks in the near term.» He recommends buying Balrampur Chini, Uttam Sugar, Dhampur Sugar and Dalmia Sugar.
Earlier in September, sugar stocks rallied on news reports that Maharashtra and Karnataka might have scanty rainfall which would reduce sugar production in these states. According to a Times of India report in October, the Central Pollution Control Board had also ordered the closure of 45 sugar factories in Maharashtra for violating the Environmental Protection Act.
Analysts said supply of sugar could be disrupted from these states.
«Strikes by farmers in Maharashtra and poor rains in the state and Karnataka impacted the sugar yield in these states,» said AK Prabhakar, head of research at IDBI Capital. «Sugar mills in Uttar Pradesh, Tamil Nadu and Andhra Pradesh have benefited from this and their stocks have rallied on the markets today.» He recommends EID Parry and Balrampur Chini.
Some analysts said the lower supply pressures may not result in sugar prices rising in the country.
«Globally, sugar prices have gone up significantly.
