Sugar makers shares surge in weak market on hike in sugar prices

Shares of sugar manufacturers like Shree Renuka, EID Paryy, Triveni Engineering, Bajaj Hindusthan, Dwarikesh Sugar, Ugar Sugar Work, Sakthi Sugars, Rana Sugars and Mawana Sugars rose up to 7 per cent in trade on Wednesday in an otherwise weak market. The surge in shares of sugar companies came after prices of sugar surged by 2-3 per cent in the backdrop of weak supply and strong demand due to ongoing festive season.

Lower-than-expected rainfall in key sugarcane producing districts of Maharashtra lowered cane yield in the state in sugar season 2024 (October 2023 to September 2024). Moreover, a dry spell in August impacted cane production in Maharashtra and Karnataka, which collectively contribute more than half of country’s sugar production, CRISIL said in a report.

Lower cane availability is expected to reduce sugar production by 3-4 per cent, which will trigger a price rise. Sugar prices are likely to rise 2-3 per cent in the backdrop of weak supply and strong demand, CRISIL noted.

The government has banned sugar exports this season because of low supply. The Directorate General of Foreign Trade issued a notification extending the restriction on sugar exports from October 31 onwards till further notice.

Lower cane availability is expected to result in reduction in cane being diverted for ethanol production from 4.5 million tonne to 4 million tonne.

Sugar makers have outperformed the Nifty Smallcap index which has so far this year advanced 28 per cent.