Balrampur Chini, Kothari Sugar: Is it the right time to buy sugar stocks?

The Union Cabinet recently approved a subsidy of Rs 6,268 crore for the export of 6 million tonnes of sugar. The development triggered a rally in select counters with Dharani Sugar and Chemical hitting the upper circuit of 20 per cent on Thursday. The opening hour witnessed selling pressure in most stocks, which closed weak (negative candle on the charts).

 

On Friday, Dharani Sugar clocked another 20 per cent up move, hitting Rs 9.60 levels at the bourses. Other sugar stocks such as Bajaj Hindusthan Sugar, Shree Renuka Sugars, Ponni Sugars (Erode), Bannari Amman Sugars have gained nearly 2 per cent.

 

Over the last two years, sugar counters have been under pressure. Most counters have lost over 50 per cent and have not seen a revival in sentiment. Every upside was utilised for liquidating positions.

 

In such a scenario, investors should ideally stay away from such counters. That said, the recent policy measure can act as a trigger; and those investors who can digest risk, can play these stocks for a short-term bounce. 

 

Here are the two stocks that look positive on the charts:

 

Balrampur Chini Mills (BALRAMCHIN):  After a decent rally from Rs 70 to Rs 169 in the last one year, the stock is witnessing profit booking now. It dipped below 200-days moving average (DMA) in the last week, but failed to make a convincing breakdown. The weekly chart shows a “Golden Cross” of 50 DMA with 200 DMA, further adding to the positive momentum. As per the daily chart, Relative Strength Index (RSI) and Moving Average Convergence Divergence(MACD) are trading with positive crossovers. Till the stock trades above Rs 125, a rally towards Rs 144 and Rs 152 cannot be ruled out in the immediate term. The level of Rs 116 – Rs 112 remains a firm support from a medium-term perspective. CLICK HERE FOR DETAILED CHART VIEW

 

Kothari Sugars & Chemicals (KOTARISUG): This is the only stock besides Balrampur Chini which is trading around its 200 DMA. It has been consolidating between Rs 8 to Rs 12 since the last few years. It had witnessed buying interest from investors when it dipped around Rs 8 and has exhibited a decent reversal since then. Currently, the stock is hovering around Rs 10 levels and a breakout above Rs 12 may take this counter to Rs 17 and then to Rs 22 levels. The MACD has decisively crossed zero line upward after one year as per weekly chart, a which is signalling an upward trend in the days ahead. CLICK HERE FOR DETAILED CHART VIEW