Why sugar stocks are surging despite broader market selloff
What's the story
Shares of Indian sugar companies have witnessed a major surge today, defying the broader market trend. The spike comes as global crude oil prices have soared amid the ongoing US-Israel-Iran conflict in West Asia. Dhampur Sugar Mills, Dalmia Bharat Sugar, Dwarikesh Sugar Industries, and Praj Industries were among the top gainers during the session, advancing between 6% and 10%.
Market performance
Top gainers in sugar space
Dwarikesh Sugar Industries led the market rally with an 8.5% jump in its share price. It was followed by Dalmia Bharat Sugar and Dhampur Sugar Mills, which saw their stocks rise by 7.7% and 7.5%, respectively. Other notable gainers included Bajaj Hindusthan Sugar (up 6.8%), Uttam Sugar Mills (up 6.2%), Praj Industries (up 6%), Shree Renuka Sugars (up 4.8%), and Balrampur Chini Mills (up 3.5%).
Ethanol impact
Why sugar stocks are gaining
The surge in sugar stocks is largely due to a spike in crude oil prices after the US-Israel-Iran conflict intensified. On March 9, Brent crude hit $119.50 per barrel, while West Texas Intermediate (WTI) briefly touched $119.48 per barrel. Higher oil prices make ethanol production more economically viable, leading producers to divert more sugarcane toward biofuel instead of sugar. This often benefits sugar companies as higher global prices improve profitability for the sector.
Policy impact
India mandates ethanol blending with petrol to reduce imports
The Indian government has mandated ethanol blending with petrol to reduce dependence on crude oil imports and lower carbon emissions. This policy requires oil marketing companies to mix a certain percentage of ethanol with petrol before selling it in the market. The ethanol blending program also supports farmers and the agricultural economy, as it increases demand for crops such as sugarcane and maize.