Sugar stocks continued their upward momentum on Thursday, 20 August, after the government tightened sugar stockholding limits amid record-high domestic prices ahead of the festive season. Bajaj Hindusthan rose 5.3%, Dhampur Sugar gained 6%, Dwarikesh Sugar Industries jumped 6.3%, Shree Renuka Sugars advanced 4%, while Balrampur Chini Mills climbed 3%.
Under the revised rules, dealers purchasing more than 10 metric tonnes of sugar per month will be allowed to hold inventory for up to 15 days. The restrictions will remain in effect from 1 September to 30 November, with the government monitoring monthly sugar sales.
Prices hit record highs
Domestic wholesale sugar prices have crossed ₹6,000 per quintal in markets such as Kanpur and Kolkata, while prices in the Muzzafarpur and Kolhapur belts have averaged above ₹5,000 per quintal, according to reports. The all-India average ex-mill sugar price rose to ₹5,400–5,500 per quintal, compared with ₹3,900 a year ago. Retail prices also increased by 13% year-on-year to ₹52.30 per kg on 18 August, according to reports.
Supply concerns ahead
The tighter norms come amid concerns over sugar availability for the 2026-27 sugar season, beginning 1 October. Industry estimates peg opening stocks at 40–42 lakh tonnes, while some estimates are lower at 32–35 lakh tonnes, against domestic requirements of around 50 lakh tonnes.
Meanwhile, patchy rainfall and dry weather have raised concerns over sugarcane output, adding to supply pressures. Sugar remains a politically sensitive commodity in India, particularly ahead of the festive season.
Technical Views
Sunny Agrawal, Head of Fundamental Research at SBI Securities, said the tight demand-supply situation has led to a firming up of sugar prices, which is positive for sugar mills. He noted that sugar millers are likely to benefit from the recent price surge as they are holding inventory purchased at significantly lower costs of around ₹37 per kg, compared with current ex-factory realisations of ₹54–55 per kg in Uttar Pradesh and ₹46 per kg in Maharashtra.
According to Agrawal, higher sugar prices could help mills mitigate margin pressure in the ethanol division, where prices have remained unchanged for the past three years.
Agrawal said his preferred bets in the sugar segment are Balrampur Chini, Triveni Engineering and EID Parry. However, he cautioned that the government’s decision to allow limited duty-free imports of 1 million tonnes of raw sugar could help moderate rising prices.
“Any government intervention can lead to a correction in sugar prices and, consequently, in sugar stocks,” Agrawal said, advising investors to adhere to proper stop-loss levels.
Hitesh Rathi, Technical Analyst – Equity & Derivatives at Angel One, said sugar stocks have witnessed a sharp vertical rally since the beginning of August, with notable names such as Avadh Sugar & Energy, Bajaj Hindusthan Sugar, Dalmia Bharat Sugar and Industries and Dhampur Sugar Mills gaining around 40–50%.
He attributed the recent surge to a sharp rise in sugar prices in international markets, where sugar futures have climbed from around $380 earlier this year to nearly $540, translating into gains of close to 40%. While sugar prices began rising as early as February, listed sugar companies have seen a sharper acceleration over the past 10–15 sessions as stocks caught up with the underlying commodity’s rally.
However, Rathi cautioned that chasing momentum at current levels may not offer a favourable risk-reward proposition, given the pace and magnitude of the recent gains. He advised investors to wait for a meaningful retracement before considering fresh positions.
From a technical perspective, Shree Renuka Sugars, Mawana Sugars and Sakthi Sugars are showing early signs of a trend reversal and could offer better entry opportunities on dips, he said.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.
