As the reports surface that the government may raise the export quota for sugar, sugar stocks rallied for the second consecutive session. Bajaj Hindusthan Sugar, Shree Renuka Sugars, Balrampur Chini Mills, Dalmia Bharat Sugar and Dhampur Sugar Mills are all gaining on the back of the update. Many analysts are positive about the sugar sector as a whole, especially since sugar production is expected to reach its highest volumes according to a report by Indian Sugar Mills Association.

Sugar sector outlook

Certain sugar stocks such as Piccadily Sugar and Allied Industries, Rajshree Sugars & Chemicals, Dalmia Bharat Sugar and Industries and Dhampure Speciality Sugars rose and hit the 20% upper circuit in trade today, extending gains for the second session. Many stocks have gained considerably over the previous month and on-year, with companies such as Davangere Sugar Company and Ugar Sugar Works rising 315.5% and 255.9% on-year respectively.

“We remain positive on the Indian sugar sector given favourable regulation (intended towards the survival of the weakest mill), which augurs well for efficient companies,” said JM Financial in a report on Friday. “Sugar stocks had gone into some correction or consolidation mode after last year’s outperformance, but now they are again gaining momentum. The overall outlook is bullish, as the ethanol story has reduced the cyclicality of this sector and the government is showing positive intensity to support the industry,” said Santosh Meena, Head of Research, Swastika Investmart. The key risk that experts see in the sector is the possibility of the government shifting its stance towards unfavorable regulations.

“We remain positive on the Indian sugar sector given favourable regulation (intended towards the survival of the weakest mill), which augurs well for efficient companies,” said JM Financial in a report on Friday. “Sugar stocks had gone into some correction or consolidation mode after last year’s outperformance, but now they are again gaining momentum. The overall outlook is bullish, as the ethanol story has reduced the cyclicality of this sector and the government is showing positive intensity to support the industry,” said Santosh Meena, Head of Research, Swastika Investmart. The key risk that experts see in the sector is the possibility of the government shifting its stance towards unfavorable regulations.

Food Secretary Sanjeev Chopra said that India could consider allowing additional exports once local production is assessed in January, according to Reuters. The government revised sugar export quotes in November, allowing up to 6 million tonnes of sugar to be exported globally. “By allowing sugar exports, Government has also protected the interest of cane farmers and sugar mills as mills will be able to take benefits of favourable international sugar price scenario and achieve better prices of sugar so that cane dues of farmers in current sugar season 2022-23 may also be paid timely and working capital costs of mills may reduce due to optimum level of sugar stocks with them,” said Ministry of Consumer Affairs, Food & Public Distribution in a report filed last month.