Stock prices in this sector have underperformed the Sensex by 27 % over the past year. The near-term outlook does not look promising, given the higher global production and normal monsoon, which has resulted in falling sugar prices.
A BNP Paribas report says companies will have to depend on higher volumes and by-products of sugar processing such as power to maintain profitability.
The biggest trigger for this highly regulated sector are measures such as removing the levy quota, release mechanism, stock holding restriction and freeing cane pricing.
Also the Government has passed the bill supporting the blending of ethanol with petro products. Ethanol is the By-product in the production of Sugar. So Sugar companies will get profit out of it.
Best Bets: While the entire sugar pack is likely to benefit from such a move, Balrampur Chini is expected to be the biggest beneficiary. Also Shree Renuka Sugar and Bajaj Hindustan are the best.
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