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Sugar stocks are in news these days for giving stellar return to its shareholders. Sugar major Dhampur sugar share price shot up around 4 per cent today whereas in last one month it has delivered near 40 per cent to its shareholders. Triveni Engineering share price today surged 4.50 per cent while in last one month it has ascended around 22.50 per cent. Similarly, Dwarikesh sugar shares today ascended more than 6 per cent whereas it has surged to the tune of near 44 per cent in last one month. Dalmia Bharat sugar price today went 5.50 per cent northward while it logged around 26 per cent rise in last one month.
According to stock market experts, sugar stocks are skyrocketing due to two major reasons — rising commodity prices and ethanol blending policy of Government of India. They said that due to soaring crude oil and other commodity prices, GoI is focused on raising the ethanol blending from existing 7-8 per cent to around 20 per cent in diesel and petrol. However, domestic ethanol supply is unable to meet this demand. Hence, ethanol blending business of sugar mills are on rise these days. Apart from this, soaring commodity prices have led to rise in sugar prices as well. So, sugar companies are getting dual benefit of current market structure.
Speaking on the reason for skyrocketing sugar stocks price; Saurabh Jain, Vice President — Research at SMC Global Securities said, "To counter soaring crude oil prices, GoI has announced ethanol blending policy. This has created an additional avenue of revenue for sugar companies. Amid soaring commodity prices, sugar prices have also gone high and they are expected to remain on the higher side in near term. So, Dalal Street is highly bullish on sugar stocks and these are the two reasons that is driving sugar stocks in north direction."
Elaborating upon the ethanol blending policy of India and its impact on Indian sugar companies; Avinash Gorakshkar, Head of Research at Profitmart Securities said, "To counter dollar outflow from India, GoI has announced ethanol blending policy in which they plans to raise ethanol use in petrol and diesel from current 7-8 per cent to the tune of 20 per cent. However, there is supply shortage of ethanol and hence sugar companies equipped to produce ethanol in higher quantity are expected to reap huge benefit from this new GoI move. This GoI policy is expected to remain a milking cow for the sugar companies and it may have long-term positive impact on their balance sheet."
On sugar stocks to buy today; Saurabh Jain of SMC Global said, "One should buy quality and big company's stocks as they are equipped with higher ethanol production. So, it's better to buy quality sugar company stocks like Balrampu Balrampur Chini, Triveni Engineering and Dhampur Sugar.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.
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