Sugar stocks rally up to 14%; here’s why

Majority of sugar stocks traded higher in Thursday’s afternoon trade in hopes of a positive outcome in today’s virtual meeting of sugar millers with the Union Commerce Minister Piyush Goyal.

Magadh Sugar & Energy traded nearly 14 per cent higher at Rs 114.80. KCP Sugar, Indian Sucrose, Uttam Sugar, Mawana Sugar and Bajaj Hindusthan were also up between 9 per cent and 11 per cent at around 2.30 pm (IST). On the other hand, the benchmark BSE Sensex traded 0.46 per cent up at 44,031.

Keshav Lahoti, Associate Equity Analyst, Angel Broking, believes that the industry will request the government to continue with the sugar export programme and increase the minimum support price of sugar.

The market is expecting that the government might announce an export subsidy to remove surplus sugar inventory in the system. The export subsidy will help sugar millers to earn better profitability and manage cash flow effectively, Lahoti added.

Other sugar players including Avadh Sugar, Vishwaraj Sugar, Rajshree Sugars, Dwarikesh Sugar and EID Parry were also up over 2 per cent.

Goyal on October 30 had said that the government is currently not considering an extension of sugar export subsidies for the 2020-21 season that commenced from October in view of stable international sugar prices.

India, the world’s second-largest sugar-producing country, had to offer export subsidies during the last two years in order to reduce surplus stocks and help cash-starved sugar mills clear cane payment to growers.

Sugar mills exported 5.7 million tonne of sugar against the mandatory quota of 6 million tonne set for the 2019-20 season (October-September), as per official data.

"Sugar (export) subsidy is currently not under consideration because international prices are stable. If there is any requirement, the government will examine it at an appropriate time,” Goyal said at a virtual press conference last month. He was replying to a query on whether the government has plans to extend sugar export subsidies for the third year in a row.