DCM Shriram Industries was up 1.84 percent, trading at ₹160.3 and Kothari Sugars & Chemicals rose 1.23 percent on the NSE at 1:55 pm on November 24. While talking to LiveMint about performance and outlook of sugar companies on a technical basis, Analysts remained bullish.
Shares of major sugar companies gained on Thursday, November 23, on expectations that prices will firm amid supply shortages due to lower production this season.
Shares of nearly 30 sugar companies rose in Thursday’s trading, capturing the attention of investors. Avadh Sugar soared 13.20 percent, Magadh Sugar jumped 12.8 percent, and DCM Shriram rose 10 percent.
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“Protests in Karnataka and unpredictable rainfall across the country have severely affected sugar production, resulting in reduced yields and a significant increase in sugar prices. Domestic sugar prices are also rising in line with global prices due to supply-side constraints,” said T Manish, Research Analyst at SAMCO Securities.
“EID Parry (India), Balrampur Chini Mills and Dalmia Bharat Sugar Industries are well positioned to benefit from these challenges. Further, all these stocks are trading above 50 and 200EMA and RSI>50 making these stocks technically strong with additional potential of 10% from the current level,” Manish added.
“The sugar industry will have a robust financial year as sugarcane crop is low due to below normal monsoons while sugar demand is high,” said Kush Ghodasara, independent market expert (CMT).
The El Nino weather pattern made August the driest in more than a century. Rainfall for the month was 161.7 mm, the lowest since 1901, LiveMint earlier reported.
Read also | Sugar mills likely to report 8-12% rise in revenues in FY23: Report
“India may shift sugar exports to the ‘prohibited’ category from ‘restricted’ for the entire 2023-24 season (October-September), worried about the impact of the weakest monsoon in five years on sugarcane crops in the main producing state of Maharashtra. and Karnataka, two government officials told LiveMint.
“Ethanol, which is a by-product of the sugar industry, will not achieve the desired goal because sugar prices are increasing, and therefore, mills are more focused on sugar production,” Ghodasara said. “On the other hand, ethanol prices offered by OMCs are lower, which makes it feasible for mills to produce it at current sugar prices.”
Additionally, “the sugar industry, fueled by government support, diversification into ethanol, and a bullish outlook from experts, is poised for significant growth. As the market continues to react to these developments, investors are keeping an eye on stocks like Kothari Sugars, Piccadilly Agro, and Renuka Sugars , anticipating continued momentum in the small and mid-cap segment of the sugar industry,” said Prashant Tiwari, NSE-certified sub-broker with Motilal Oswal.
One of the best options in the sector, according to Ghodasara, is Balrampur Chini, which is seeing a further trend, with a target of ₹525 and stop loss at ₹431. “Shares are consistently traveling in an upward trend channel on the weekly time frame and also supporting a 10-week moving average since the last 8 weeks,” he added.
Additionally, EID Parry “signals a trend reversal to be positive and also prices have just crossed the 10-week moving average at 500. The stock has taken multi-week support at ₹457, which can be the stop loss while the target can be completed ₹700″, according to GhodasaraRe”
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Updated: 24 Nov 2023, 15:20 IST