Sugar stocks experienced a rally on Thursday after ICRA Ratings told CNBC TV18 that the anticipation of decline in sugar production has resulted in recent increase in the prices.
Sugar stocks rallied on Thursday, led by gains in Rajshree Sugars, Balrampur Chini Mills, EID Parry, Dhampur Sugar and Avadh Sugar, up in the range of 3 to 19 percent.
In intraday, share price of Balrampur Chini Mills rose 5 percent, EID Parry’s increased by over 3 percent while Dhampur Sugar’s stock price surged over 4 percent. Rajshree Sugars rose the highest at 19 percent around noon.
Meanwhile, Avadh Sugar announced a bonus issue and was up 10 percent.
ICRA Ratings told CNBC-TV18 Thursday that there could be a shortfall in production in the current season as drought-like condition in Maharashtra and Karnataka is likely to impact sugarcane planted last year.
It further added that the government is aiming to increase the diversion of sugarcane towards ethanol, therefore it could allocate higher loans to sugar mills for the production of ethanol.
"While anticipation of decline in sugar production has resulted in recent increase in the prices to Rs 33-33.5 per kg)(ex-mill, Uttar Pradesh), pressure on prices going forward cannot be completely ruled out given that surplus situation is likely to prevail on account of opening stocks for the forthcoming season," an ICRA release said, quoting Sabyasachi Majumdar, senior vice-president and group head of corporate ratings at the agency.
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