India's sugar stocks down 6% today: What's the reason?
What's the story
Shares of sugar firms fell up to 6% today after the Indian government ordered oil marketing companies to stop diverting sugar for ethanol production. The directive is effective for the 2026/27 supply year and has hit major players like Bajaj Hindusthan Sugar and Balrampur Chini Mills. The move comes amid concerns over potential production shortfalls due to insufficient rainfall.
Market impact
Sugar stocks in freefall
In today's trade, Bajaj Hindusthan Sugar led the losses, while Shree Renuka Industries followed closely.
Balrampur Chini Mills and Triveni Engineering and Industries also witnessed declines of 4% and over 3%, respectively.
Other companies like EID Parry and Dhampur Sugar also saw their shares shed over 2% each.
Production restrictions
Government's ethanol directive
The government's decision restricts mills from diverting sugarcane and molasses between sugar and ethanol production based on market conditions.
This could impact margins and returns on investments in ethanol capacity.
The move is aimed at increasing domestic sugar availability and easing prices that have hit record highs in India, the world's largest consumer of this commodity.
Stock restrictions
Centre imposes stock limits
Ahead of the festive season, the Centre reduced the period for which sugar dealers can hold stocks to 15 days.
It has also capped their holdings at 1,000 quintals.
The restrictions, effective from October 15 to November 30, are aimed at preventing hoarding and ensuring supplies continue to flow through the market during peak demand periods like Ganesh Chaturthi, Dussehra, and Diwali.