Balrampur Chini, Dhampur Sugar: FPR could push stocks near breakout levels

On a breakout, sugar stocks may see up to 24 per cent upside

Sugar stocks were in focus on Thursday, a day after the government hiked the minimum price that mills have to pay to sugarcane growers, also known as the Fair and Remunerative Price (FRP), by Rs 5 per quintal to Rs 290 a quintal for 2021-22 (October-September) sugar season. However, the government has ruled out any immediate commensurate increase in the sale price of sugar at least for now.

Major sugarcane producing states such as Uttar Pradesh, Punjab and Haryana fix their own sugarcane price called 'state advisory prices' (SAPs), which are usually higher than the Centre's FRP.

"Since the government has refused a rise in the price at which mills can sell is a dampener. Sugar companies make profits only when sugar prices rise. This happens when production/ supply is low and demand is strong and stable. When prices rise producers produce more since they are assured of MSP. Higher produce brings prices down. This cyclicality makes sugar stocks inconsistent performersm," said Dr. V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services.

Adding: "The best time to buy sugar stocks is when prices are low and companies make losses resulting in low stock prices. Sugar stocks give short-term trading opportunities but are not great investment buys."

Here's how frontline sugar sector stocks look on the charts.

Balrampur Chini Mills (BALRAMCHIN)

Likely target: Rs 400 and Rs 415 (after crossing 50-DMA)

Upside potential: 8% to 11%

Balrampur Chini Mills is trading with positive sentiment on the upper side of the bullish trend. Any up move above the breakout mark of Rs 387 may see an immediate rally towards Rs 400 and then Rs 415 levels, according to the daily chart. The near-term support comes in at Rs 350 levels, which is its 50-days moving average (DMA). As long as this moving average support is held, investors may stay bullish on the stock. CLICK HERE FOR THE CHART

Dhampur Sugar Mills Limited (DHAMPURSUG)

Likely target: Rs 525 (after crossing Rs 475)

Upside potential: 10%

Although, the overall structure of the daily chart shows weakness, the stock has managed to reversal and has held the support of 100-DMA on a closing basis. The current 100-DMA is placed at Rs 307 levels. A breakout above the resistance of Rs 475 levels may spark a rally towards Rs 525, which is the next significant obstacle. The volumes have not been in favour bears, signalling a reversal in trend.  CLICK HERE FOR THE CHART

 

Avadh Sugar & Energy Limited  (AVADHSUGAR)

Likely target: Rs 515 (after crossing 50-DMA)

Upside potential: 12%

The stock is showing a positive bias on the charts and has a sentimental support at Rs 400 levels. This optimism needs to see the counter actively conquer the resistance of 50-DMA placed at Rs 456.70 levels. Upon crossing the same, the stock may head in the direction of Rs 515 levels. There is a formation of “Double Bottom” on the Relative Strength Index (RSI), which has a breakout at 50 value. Once the stock manages to cross this, the strength may see the stock rally.  CLICK HERE FOR THE CHART

 

Shree Renuka Sugars Limited (RENUKA)

Likely target: Rs 32.30

Upside potential: 24%

Shree Renuka Sugars Limited has managed to hold the support of Rs 22.75 levels, which is its 100-DMA and is signalling a positive reversal. This rally may see a decisive jump towards the 50-DMA placed at Rs 32.30 levels, which is also the foremost hurdle the counter needs to cross, according to the daily chart. The RSI has managed to rise above the oversold territory, highlighting the underlying strength in this counter. And as long as the support of 100-DMA is maintained, any weakness may see follow-up buying.  CLICK HERE FOR THE CHART

 

Triveni Engineering & Industries Limited (TRIVENI)

Likely target: Rs 190 and Rs 200

Upside potential: 5.50% to 11%

A trendline breakout above the Rs 180 mark may see sharp rally towards Rs 190 and then Rs 200 levels, as per the daily chart. The recent stock formation suggests a support near Rs 160 from where Triveni has managed to reverse thrice lately. Similarly, the RSI is holding 35 value on the downside and is witnessing buying reversal. All thi suggests underlying momentum. The stock has limited downside and may see buying on any healthy correction going ahead. CLICK HERE FOR THE CHART