Stock market today: Sugar stocks are under pressure since early morning deals on Thursday. During opening bell today in Indian stock market today, sugar major Balrampur Chini share price witnessed near 6 per cent declie, Dwarikesh Sugar share price went down 4.50 per cent, Sakthi Sugars shares dipped around 4 per cent, Mawana Sugar stock price dashed ariound 3 per cent while Ugar Sugar crashed to the tune of 6 per cent. Shares of Bajaj Hindusthan Sugar Ltd and Avadh Sugar & Energy Ltd crashed over 6 per cent during morning session on Thursday.
According to stock market experts, sugar stocks are under pressure due to ethanol price reduction buzz. Experts said that due to dip in crude oil prices, ethanol prices have gone down in global merchandise and Indian market is expecting this price reduction in near term. As ethanol business is one of the major themes that has driven sugar stocks in recent few quarters, this news has triggered profit booking in sugar segment. However, they said that sugar stock may rebound strongly if there is no rate cut in India in near term.
Speaking on the reason the reason for slide in stock stock prices in India, Saurabh Jain, Vice President — Research at SMC Global Securities said, "market is speculating rate cut in ethanol prices in India after dip in crude oil prices. In fact, ethanol prices have already gone down in some countries like Brazil. So, in the wake of lowering crude oil prices, ethanol prices are expected to go down in near term in India as well. That's why profit booking is taking place in Indian stocks today."
SMC Global Securities expert said that weak crude oil prices are expected to bring petrol prices downwards. As ethanol is mixed with petrol, oil making companies are expected to lower the ethanol prices to keep a sync with global crude oil prices.
Expecting further pressure in sugar stocks listed on Dalal Street, AvinashnGorakshkar, Head of Research at profitmart Securities said, ‘Sugar output is expected to go down in current sugar harvest cycle in India. Hence, ethanol output is expected to go down and hence in the wake of dip in raw material, ethanol output is also expected to remain under pressure. So, in the wake of demand-supply constraint, ethanol prices may remain steady if not go northward. Hence, a strong rebound in sugar stocks can’t be denied if there is no rate cut in ethanol prices in India in near term."
However, stock market experts maintained that decline in sugar prices are completely speculative and hence one should not take any position or squareoff one's position on such speculations. They should wait for an official statement from the Government of India (GoI) in this regard.
In fact, the GoI has already responded to the media reports citing, “There is no such proposal to reduce ethanol prices.”
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 taking any investment decision.
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