US-Iran war: Amid the ongoing US-Iran war, sugar stocks have remained in focus as rising crude oil prices make Indian sugar companies more attractive, given the government’s push for ethanol blending.
On Friday, sugar stocks declined by as much as 5%, with Avadh Sugar & Energy and Balrampur Chini Mills emerging as the top laggards. They were followed by nearly 4% losses in Dalmia Bharat Sugar and Industries and Dhampur Sugar Mills.
Why have sugar stocks remained in focus?
A rise in oil prices is expected to accelerate the shift toward ethanol production, as major sugar-producing nations such as Brazil may divert more sugarcane toward ethanol instead of sugar manufacturing.
If such a transition occurs, sugar supplies in the market could tighten, potentially pushing prices higher — a trend that is already unfolding across global markets.
According to market experts, the government aims to achieve 20% ethanol blending in petrol by 2025, driving demand for sugarcane and benefiting sugar stocks. The Ethanol Blending Program is expected to reduce crude oil imports, support farmers, and strengthen energy security.
“The conflict has pushed Brent crude prices above $100 per barrel, increasing the government’s import bill and highlighting the need for alternative energy sources. India’s ethanol blending has already reached 10% in 2022, with the government targeting 20% blending by 2025,” said Seema Srivastava, Senior Research Analyst at SMC Global Securities.
Srivasatava further opined that the ethanol blending programme offers several key benefits for the economy and the environment as it helps reduce India’s dependence on imported crude oil by partially substituting petrol with domestically produced ethanol. At the same time, it provides a stable revenue stream for sugar mills and supports sugarcane farmers, thereby strengthening the agriculture sector. Additionally, ethanol is considered a cleaner and more environmentally friendly alternative to fossil fuels, as it helps lower carbon emissions and contributes to a more sustainable energy mix.
On the other hand, Nitant Darekar, Research Analyst at Bonanza, believes that MSP-controlled pricing continues to cap revenue realisations for mills, while rising cane procurement costs are simultaneously squeezing operating margins from the other end.
“ The ethanol blending story, which drove a meaningful re-rating in sugar stocks over the past two years, is also losing momentum following recent policy target revisions — reducing earnings visibility considerably,” Darekar said.
US-Iran war: Is it the right time to buy sugar stocks?
According to Srivasatava, sugar stocks that are likely to get a positive perspective are — Balrampur Chini Mills, Shree Renuka Sugars and Triveni Engineering & Industries.
“The government’s proactive policies and the sugar industry’s efforts to increase ethanol production capacity are expected to drive growth in the sector. With the government’s focus on renewable energy and increasing ethanol blending, the future looks bright for sugar companies,” she added.
Meanwhile, Darekar said that stocks like Balrampur Chini have seen buying interest from lower levels, but the broader trend remains cautious — current price strength lacks strong volume conviction or meaningful institutional participation.
“India’s sugar output is projected to rise nearly 18% in 2025-26, pointing to a supply surplus that limits any structural pricing upside. Until there is clear policy support on ethanol pricing or a credible reduction in global supply, sugar stocks are best treated as a trading sell on rallies rather than a positional buy,” he further added.
Disclaimer: This story is for educational purposes only. The views and recommendations above are those of individual analysts or broking companies, not Mint. We advise investors to check with certified experts before making any investment decisions.
