Sugar stocks turn bitter for investors
Sugar stocks have become the worst performing stocks in the market this week. The segment which was the star performer last year and was able to attract keen investor interest has been declining from the last one month.
The stocks are falling due to declining international sugar prices and analysts are advising investors to stay away from the segment as it is likely to decline further. The government interference in the form of checks on the rising prices and expected high output does not allow any reverse trend in stocks.
The shares of leading firms in the sector like Shree Renuka Sugars, Balrampur Chini and Bajaj Hindustan fell over 30% after touching highs in 2010 while other firms including Rajshree Sugars, Sakthi Sugars and Dhampur Sugar declined between 38-47%. Bajaj Hindustan and Balrampur Chini also most declined 10 per cent in the last three trading sessions.
The prices of sugar in international markets have also declined due to the import nations deciding to postpone their purchases. White sugar in London was at $547 a tonne after reaching a high of $767 at the beginning of the year. In the meantime, the sugar prices in the country had reached over Rs 40 a kg with any fundamental reasons.
Analysts believe that this trend may be lead to speculations in the market. They estimate that the price of white sugar has fallen 6-18% to $529 per tonne and raw sugar price has dipped 11-12% to 19.6 cents per pound in the international markets.
The production estimate in the country has risen from 15.5 million tonnes to 17 million tones putting more pressure on the prices of sugar in the country and outlook for the stocks.
Most expect the fall in the sugar stocks to continue for some time to come. However some believe that the stocks will pull back before another round of reduction. There are some contrarians who said that they won't be ready to sell sugar at current prices. It is also expected that the deficient supply of sugar in the market will be corrected in few months time.
The sugar companies will now be just profit making firms and not the super profit making companies as they were before few months. Large global funds have also begun to sell their shares in the sugar stocks.
