Sugar stocks are down following reports on export restrictions

Sugar stocks on Tuesday came under selling pressure after media reports indicated that restrictions were likely to be imposed on exports to protect food supplies in the country. The Government is planning to limit sugar exports at 10 million tonne (MT) for the marketing year that runs through September, in order to ensure that there are sufficient store before the next sugar season starts in October.

Shares of Shree renuka sugars dropped as much as 13.8% in Intra-day trade. While the stock of Balrampur chini mills down by 5.7% on Tuesday, stocks of Bajaj hindustan sugar, Mawana sugars and Ugar sugar works fallen 5% each. In intra-day trade, shares of Uttam sugar mills, Dwarikesh Sugar and Balrampur Chini Mills had fallen nearly 10%.

“The government’s decision to limit the export of sugar to 10 MT is not very surprising as the move comes against the stage of increasing inflation and is meant to keep tabs on the rising domestic food prices. This will impact the global sugar supply as India is the second-largest exporter of sugar after Brazil,” said, DRE Reddy, CEO and managing partner, CRCL LLP.

The distraught rally in sugar stocks has reached levels rare for any stock or sector. According to Bloomberg, an index of 15 top sugar stocks is trading above the 3-standard deviation line over an eight-year period, delighted by a record export outlook and expectations of ethanol being a new source of energy.

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