Shares of sugar companies were trading higher by up to 10 per cent on the BSE on Thursday, in an otherwise subdued market, on positive outlook. Lower cane crushing, and subsequent decline in sugar production augers well for the domestic sugar industry, according to market analysts.
Dwarikesh Sugar Industries rallied 10 per cent to Rs 29.95, on back of two-fold jump in trading volumes. The stock was trading close to its 52-week high level of Rs 32.95 touched on March 2019.
Avadh Sugar & Energy, Uttam Sugar Mills, Triveni Engineering & Industries, Mawana Sugars, Shree Renuka Sugars and Dhampur Sugar Mills, too, were up in the range of 4 per cent to 7 per cent on the BSE. In comparison, the S&P BSE Sensex was down 0.41 per cent at 41,292 points at 02:46 pm.
"India sugar production is down 35 per cent year on year (YoY) at 4.58mn tonne as on 15 December. This drop in production is primarily due to a sharp decline in sugar production in Maharashtra and Karnataka," Indian Sugar Mills Association (ISMA) said in its latest press release.
This, along with the expected exports of 3.5 million MT (as against the government’s target of 6 million MT) in sugar year 2020, is likely to improve the demand-supply situation in the domestic market, thus supporting the sugar prices in the near term, according to rating agency ICRA.
“Favourable government policies have further aided in keeping sugar supply under check and, consequently, prices have sustained above MSP of Rs 31 per kg. With regards to exports, millers have signed contracts for about 2.0 mn tonne of sugar to date and another 3.0 mn tonne are likely in the upcoming months,” analyst at Elara Capital said in sugar sector update.
Thus, lower cane production, higher diversion to ethanol and a pickup in exports should lead to lower inventory levels in India by the end of the season, it added.