Ethanol factor creates excitement for sugar stocks; Renuka Sugars & Magadh Sugar pip EID Parry & Balrampur Chini to emerge as top gainers!
A couple of years back, stocks from this sector were overlooked by investors given the hiccups faced by this industry; however, fast-forward to 2021, these stocks have become the darling of traders now. So, let’s know the reason behind this sudden swift in the sugar stocks.
One of the most exciting and happening story in the last couple of months has been the sugar story! Despite the second-wave of COVID-19, which derailed the momentum of bulls in Q2CY21 temporarily, stocks from this sector sweetened investors’ wealth.
A couple of years back, stocks from this sector were overlooked by investors given the hiccups faced by this industry; however, fast-forward to 2021, these stocks have become the darling of traders now. So, let’s know the reason behind this sudden swift in the sugar stocks. There are multiple factors going in favour of this sector and the major one is ‘Ethanol’ story. Ethanol is a by-product of sugar mills, used to blend with petrol. The Government of India has revised its target for 20 per cent ethanol-blending with petrol (E20) by preponing it by 5 years to 2025.
India’s net import of petroleum was 185 Mt at a cost of US $551 billion in 2020-21. Most of the petroleum products are used in transportation. Hence, a successful E20 programme can save the country US $4 billion per annum, i.e., Rs 30,000 crore. Besides, ethanol is a less-polluting fuel and offers equivalent efficiency at a lower cost than petrol.
So, Q2CY21 i.e. the second quarter of the calendar year 2021 has been very promising for the sugar stocks as a majority of them delivered handsome returns. Nearly 14 stocks soared more than 100 per cent during the three-month period of April-June, 2021. Shree Renuka Sugars has been hands-down winner as it jumped 330 per cent and relatively outperformed all the sugar stocks with a wide margin. Magadh Sugar & Energy has been the second top-performing stock as it gained 299 per cent while Bajaj Hindusthan Sugar was at the third spot in the gainers’ list.
Meanwhile stocks like EID Parry India, Balrampur Chini Mills, Vishwaraj Sugar Industries along with Kothari Sugars & Chemicals delivered positive returns but these stocks have relatively unperformed their peers.