Sugar stocks dip on export ban stalemate

While the Sensex closed at a new high of 13282.91, 145.42 points higher over the previous day, the share prices of various sugar companies slipped between 2 and 5 per cent as the government deferred the decision on export ban in the Cabinet meeting on Thursday.

On Thursday, the share prices of these stocks had touched significant intra- day highs (Bajaj Hindusthan touched Rs 315 while Balrampur Chini touched Rs 106.90 yesterday to close at Rs 289.50 and Rs 97.45 today) on the likely lifting of the sugar export ban. In July, the government had imposed the ban for controlling the rising prices.

"There was a buzz earlier this week about the possibility of sugar export ban getting lifted. However, with the deferring of the decision, the market sentiment has turned negative for the sugar stocks," said Kapil Bagaria of Sushil Finance. "No positive direction has come from the government for the sugar industry as far as lifting of ban is concerned. There are differences between the ministries of finance and agriculture on the issue," said S P Tulsian, an investment advisor. Even the Union Agriculture Minister Sharad Pawar admitted in the Economic Editors Conference on Wednesday that there is "sufficient availability" of sugar in the country and the country is estimated to produce 227 lakh tonne in the 2006-07 season.

However, the finance ministry is concerned that the lifting of ban may lead to a price rise and higher inflation. Sugar has a weightage of 3.62 per cent in the wholesale price index, even higher than steel (3.2) and cement (1.73).