Sugar shares rally on hopes of higher ethanol blend amid West Asia crisis

Sugar stocks surged on expectations that rising crude oil prices amid the West Asia crisis may prompt the Centre to raise ethanol prices and increase the blending mandate from 20 per cent

Shares of Indian sugar companies rallied on Wednesday on hopes that the Centre may not only revise ethanol prices — which have been on hold for almost three years — but could also consider raising the mandate from 20 per cent to 27 per cent. This comes as crude oil prices touch new highs due to the West Asia crisis.

 

Oil prices have surged up to 12 per cent since the start of the war in West Asia.

 

The rally in sugar stocks came even as the broader BSE and NSE remained weak.

 

Traders said sugar shares jumped also because of talk if the West Asia crisis lingered on and crude oil remains on the boil; Brazil, which is one of the largest producers of sugar in the world, may divert more quantities of it towards making ethanol, thus cutting down on surplus global supplies.

 

Globally, too, sugar prices have been on the rise since the last two days on hopes that the West Asia war may put crude under pressure.

 

Some traders said the rally in sugar stocks was also fuelled by a larger-than-expected drop in sugar production in the 2025-26 season that started in October from the earlier projected 29.5 million tonnes to 28 million tonnes. This was seen as supportive of the farm-gate prices.

 

At the National Stock Exchange (NSE), shares of Bajaj Hindustan closed at ₹17.21 per unit, 10.25 per cent higher than the previous close.

 

Similarly, shared of Ponni Sugar Erode also closed 10.24 per cent higher than its previous close on Wednesday, while that of Dwarikesh Sugar closed 9.6 per cent higher than its previous close. Shares of Rana Sugar ended the day at a level which was 9.23 per cent higher than the previous close and Ugar Sugar was 8.51 per cent higher.

 

“The rally in sugar shares on Wednesday is largely guided by developments in the energy sector and also some impact of a lower-than-anticipated sugar production in the 2025-26 season,” Rahil Shaikh, managing director (MD) of MEIR Commodities, a prominent player in the global agricultural commodities trading industry, told Business Standard.

 

He said that the jump was not on account on any sentiment around exports of sugar as Indian sugar continued to remain hugely overpriced as compared to its global peers. This is despite some improvement in global rates in the last few days.

 

“My understanding is though the government has permitted exports of 2 million tonnes of sugar in the 2025-26 season, mills at best can export just around 0.7-0.8 million tonnes of the sweetener. This is because there is no parity in price of Indian sugar and its global peers,” Shaikh added.

 

Meanwhile, Indian equity markets declined as the likelihood of prolonged turmoil in West Asia and the ripple effects of higher oil prices prompted traders to shift funds to safe haven assets.

 

India imports nearly 85 per cent of its crude oil requirements, and the surge in crude prices to their highest level in four years has reignited investor concerns on inflation. And, the country’s external balances, further added to the market’s losses, according to ICRA. 

(With inputs from Deepak Korgaonkar)