Sugar stocks surge on low output estimates

Sugar stocks zoomed past traders’ estimates on the Bombay Stock Exchange (BSE) today in anticipation that the sweetener's output in India will decline further in the next year on continuous crop diversion in favour of pulses.

The stocks of Triveni Engineering jumped 20 per cent, while Ugar Sugar and Venus Sugar surged 18.23 per cent and 16.78 per cent, respectively on the BSE Sensex. The market leader, Bajaj Hindusthan, perked up by 10.37 per cent, while other leading companies such as Balrampur Chini, Dhampur Sugar and Dwarikesh Sugar jumped between 7-10 per cent.

“Traders resumed their activities in the new financial year after a lull of almost ten days due to the closure of books of account for the year-end. That resumed activities in sugar stocks that resulted into price rise,” said Naveen Mathur, head (commodities) of Angel Broking.
 

TASTING SUCCESS
Company	April 6	April 8	Rise (%)
Triveni Engineering	43.80	52.55	19.98
Ugar Sugar	14.92	17.64	18.23
Bajaj Hindusthan	55.45	61.20	10.37
Kesar Enterprises	38.00	41.80	10.00
Dhampur Sugar	29.05	31.95	9.98
Upper Ganges Sugar	42.15	46.35	9.96
Oudh Sugar Mills	37.29	41.00	9.95
Dwarikesh Sugar	42.90	47.15	9.91
Balrampur Chini	57.70	62.05	7.54
EID Parry	153.90	165.30	7.41

According to the revised estimates by Indian Sugar Mills Association (ISMA), India’s sugar output is likely to decline 46.42 per cent to 14.2 million tonnes during the current sugar year (October-November) from 26.5 million tonnes in the corresponding period last year. Experts believe that the country’s sugar output may further decline next year unless the new government’s policies lead to an exorbitant price rise, which is highly unlikely.

Although India is in a comfortable position in connection with the domestic consumption with about 9.5 million tonnes of carryover stocks, industry players worry that it will also clear its inventory fully. This will leave India to depend solely on the next season’s output, an analyst said.

Sugar output of China in the current season fell 9.9 per cent to 11.28 million tonnes as of March 31 as compared to 12.52 million tonnes a year earlier.

In the futures market, sugar for delivery in April rose 1.48 per cent to Rs 2,202 per quintal with a turnover of 17,540 lots on the National Commodity and Derivatives Exchange (NCDEX). The May contract for the sweetener gained 1.23 per cent at Rs 2,301 per quintal and June contract moved up by 1.19 per cent to Rs 2,390 per quintal. Analysts attributed the persistent rise in sugar prices to the summer season demand from bulk consumers such as ice-cream and cold-drinks makers ,coupled with a downward revision in output estimates by ISMA.

“The sugar sector was the story of the day. There was wide spread gains in the sector. Triveni was up more than 20 per cent . The gains were restricted as a large number of sugar shares hit the circuit,” said Tarun Satsangi of Bonanza Commodity Broker.

A section of the traders has been speculating that India may scrap the 60 per cent import duty on white sugar, boosting supplies of the sweetener in the local market. However, another section believes that such a decision is unlikely until the elections. However, looking at higher price in the global market -- at $400 per tonne, the import cost comes to around Rs 2,200 per quintal.

Looking at the current prevailing price in the spot market at Rs 2,150 per quintal, it is unlikely that any trader would be interested in importing white sugar and selling at a loss in domestic market, Mathur said.