Amid multiple triggers for sugar stocks, shares of Shree Renuka Sugars spurted 17% to hit fresh 52-week high on Thursday. This sugar scrip has surged more than 35% in just two sessions amid the government’s ambitious ethanol blending programme. Against Rs 35.85 apiece on the NSE on April 1, the shares rose over 36% to trade around Rs 49 on Thursday.
After trading on new high of Rs 49 per share on the BSE, the stock was trading with gains of over 16% to Rs 47.95 apiece around 10.45 am.
Most of the sugar stocks have shown exemplary returns in the past one year. As on April 7, Shree Renuka Sugars share price has jumped 385% in the past one year and over 800% in the last two years.
What’s working for sugar stocks?
Ethanol blending push and Sugar MSP at Rs 31 per kg remain major triggers behind the recent rally in sugar stocks.
As per Philip Capital, the government’s ethanol blending programme has structurally transformed the sugar sector in India and will help to reduce cyclicality of the industry.
Ethanol blending and Minimum Selling Price (MSP) of sugar for domestic market at Rs 31 per kg has helped the industry despite surplus sugar production, it says. Domestic sugar prices are close to MSP in Maharashtra at Rs 31-32 per kg while in north states they are c. Rs 34-35 per kg.
The record cane production in the sugar season 2021-22 (October – September 2022) will continue to create surplus sugar production in the short to medium term despite diversion of sugar to ethanol, limiting the sugar price increases in the domestic market, says Philip Capital.