Sugar stocks spurt on policy cue

Sugar stocks once again sweetened the markets on Friday. There were many factors creating a better outlook for the sector such as non-payment of incentives to sugarcane farmers, increased ethanol blending with petrol.

In Friday's trades, major gainers were Simbhaoli Sugar (up 9.96 per cent to Rs 144.05), Dhampur Speciality Sugars (up 9.83 per cent to Rs 22.35), Oudh Sugar (up 9.12 per cent to Rs 223.25), Ponni Sugars - Erode (up 8.36 per cent to Rs 103.65), EID Parry (up 7.49 per cent to Rs 244), Gayatri Sugars (up 7.21 per cent to Rs 21.55), Rana Sugars (up 6.29 per cent to Rs 49), DCM Shriram (up 5.85 cent to Rs 190.1), Dhampur Sugar (up 5.36 per cent to Rs 235.85), Piccadily Agro Industries (up 5.08 per cent to Rs 9.31) and Shree Renuka Sugars (up five per cent to Rs 859.6).

Although most of the stocks have seen an uptrend over past few days, the spurt on Friday was due to a slew of good news.

Kapil Bagaria, equity analyst with Sushil Finance Consultants, said, "There is news that the government may decide that cooperative and public sector mills will not pay incentives to farmers henceforth. Private sector players have the option to pay. The market feels that the government's decision is expected to ease competition among players for procuring cane."

Brokers feel that markets also reacted to reports of worldwide shortage of sugar and the US plan for sugar imports. Moreover, the rising proportion of ethanol blending for petrol worldwide, is expected to provide boost to ethanol pricing.

The momentum in sugar stocks till now has been primarily due to the demand-supply mismatch. Going forward, the rising demand for ethanol will be another trigger.

Ethanol prices have been on an upswing lately.

Bagaria added that sugar stocks are expected to do well in the next 3-6 months. The sector is expected to do well on back of robust demand and rising prices.