Sugar Stocks Soar Up to 45% in a Month, Know the Reasons Behind Rally

Shares of Indian sugar-producing companies have been witnessing a bullish trend over the past few days. In the last one month, the benchmark NSE 50 index of the National Stock Exchange has risen by about 4.3%, but sugar stocks have surged by as much as 45%. A look at the top 20 companies shows that 16 of them have recorded gains of over 10%, while nine companies have seen their shares rise by more than 20%.

However, Friday was somewhat different. On that day, shares of all companies declined except Simbhaoli Sugars and Dolex Agrotech Ltd. Major companies such as Balrampur Chini Mills, Dalmia Bharat Sugar, Dwarikesh Sugar Industries and Shree Renuka Sugars witnessed sharper declines.

Among the top five companies by market capitalization, shares of EID Parry India rose 6.47% in a month, Balrampur Chini Mills gained 8.19%, Triveni Engineering & Industries climbed 12.48%, Shree Renuka Sugars advanced 14.24%, and Bajaj Hindusthan Sugar surged 21.57%.

Among other major companies, shares of Simbhaoli Sugars jumped 45.88%, Andhra Sugars rose 34.80%, Mawana Sugars gained 29.98%, Sakthi Sugars increased 24%, and Rana Sugars climbed 25.14% over the past month.

Reasons behind the Rally

Several factors are believed to be driving this rally in sugar stocks. One key reason is the expectation that closing sugar stocks at the end of the current sugar season (2025-26) will fall to a nine-year low. Sugar production this year is estimated to be around 28 million tonnes. Until last year, the industry had projected domestic consumption at 28.5 to 29 million tonnes. Based on this, sugar production (excluding diversion for ethanol) will be lower than consumption. Considering last year’s carryover stock of 5 million tonnes and exports of around 1 million tonnes, the closing stock this year is expected to be around 4 million tonnes. This would be the lowest since 3.94 million tonnes recorded in 2016-17.

These figures are being seen as a major trigger behind the rally in sugar stocks. Industry sources say that after the assembly elections in five states, an upward trend in sugar prices is almost certain. Currently, the government is releasing higher monthly quotas to control prices, but this quota may be reduced in the coming months.

According to the Indian Sugar and Bio-Energy Manufacturers Association (ISMA), as of April 15, crushing operations had stopped in 520 out of 539 sugar mills across the country. Only 19 mills were still operational. Sugar production (excluding ethanol) stood at 27.48 million tonnes by mid-April.

Sources also indicate that the central government may increase the minimum selling price (MSP) of sugar after the assembly elections. The MSP has remained unchanged at Rs 31 per kg since February 2019.

Another factor is related to ethanol. Due to the Iran war, global crude oil prices have increased, with Brent Crude currently trading above $100 per barrel. To reduce the oil import bill, the government is promoting ethanol blending in fuel, which is expected to boost demand in the coming days.

The All India Distillers Association has also urged the government to increase ethanol blending in petrol from 20% to 30% (E30). According to ISMA, India’s annual domestic ethanol production capacity exceeds 20 billion litres, which is significantly higher than the 11 billion litres required for 20% blending. It is also believed that the government may raise ethanol prices to boost supply, which will directly benefit sugar mills.