Sugar stocks rise as exit polls predict gains for Samajwadi Party

Shares of sugar companies, mostly based in Uttar Pradesh, rose on Monday in an overall weak market. Bajaj Hindusthan rose nearly 2 per cent while Dhampur Sugar Mills rose 1 per cent. While Balrampur Chini shares are weak on Monday, the company has witnessed share price jump over 12 per cent over the past one week. The same holds true for Bajaj Hindusthan and Dhampur Sugar.

"We can buy call option of UP sugar stocks (Balrampur Chini & Bajaj Hindustan) as the SP is more favourable to the industry than the rival Bahujan Samaj Party (BSP)," Sunil Kumar Arora, country product head of futures and options at Kantilal Chhaganlal Securities told Reuters.

Exit polls put out by leading television channels suggest Samajwadi Party or SP to do better in the Uttar Pradesh elections. The sugar industry expects a favourable policy regime if Samajwadi Party comes to power.

UP is the biggest manufacturer of sugar cane in India. Ahead of the polls, the Mayawati government in UP raised prices to Rs 250 per quintal from Rs 210 per quintal despite a significantly high sugar cane production in 2011-12.

The state-administered prices or SAP play a significant role as sugar producers are expected to pay that price to farmers to procure sugar.

The central government is considering a sugar price de-control. The government each year releases the minimum support price or MSP.

India’s sugar production is estimated to be 28.3 million tonnes in 2011-12. For the year 2012-13, the Indian Sugar Mills Association or ISMA expects the production to be 25-26 million tonnes with domestic consumption being pegged at 22-23 million tonnes.

source: ndtv proftit