Most sugar stocks hit a 52-week low on Monday due to the lack of positive guidance. Estimates of higher acreage this season dampened market sentiments initially. But, short covering at the year's low lifted the price marginally towards the end of the session.
Leading the lot was market leader Bajaj Hindusthan with Rs 64.9, before closing at Rs 65.15. Balrampur Chini touched Rs 61.45 mid-trading session and saw a marginal gain at Rs 62.05.
The government had allowed 500,000 tonnes of sugar to be exported but only 1.5 lakh tonnes has been exported so far with international prices witnessing a sharp fall. In some international markets, sugar is selling below the Indian price, making exports unviable.
The possibility of a good crop in Brazil and India has further dampened sentiments. "Sugar prices have been hovering below the cost of production for quite some time. Companies will not be able to make a profit at this level. The situation is unlikely to change for sugar companies at least for the next four-five months," said Sageraj Bariya, an analyst with Angel Broking.
Weak market sentiments also provided an opportunity to traders to sell their stocks and make whatever money they could, he added.
Apparently, there has been no positive sentiment for domestic sugar industries. Lack of favourable policies, including opening of exports, has proved negative for sugar producers. The extra sugar released over and above the monthly quota also resulted in a glut in supplies pushing prices down in the physical market.
In the Vashi wholesale market, medium sugar (M-30) prices gained marginally by Rs 10 to trade at Rs 2,786-2,881 per quintal. In contrast, small sugar (S-30) fell by Rs 5 to trade at Rs 2,726-2,761 per quintal on Monday.
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Market sentiments globally remained negative. Weighed down by weaker oil prices and a strong dollar, raw sugar futures fell four per cent on the benchmark ICE where July futures traded down 0.98 cent or 4.4 per cent at 21.42 cents a lb, after falling as low as 21.38 cents a lb.
India's sugar production in the 2010-2011 crop marketing season starting October is now estimated to be around 24.2 million tonnes, down almost 800,000 tonnes from the earlier estimates of 25 million tonnes. However, the marginal drop in output is not expected to have any significant impact on prices, as supplies are expected to be more than the annual demand of 22 million tonnes.
Sugar production for 2010-2011 has been revised downwards because of lower-than-expected recovery in Uttar Pradesh, the country's second largest producer of the sweetener.