Here’s why Sugar stocks like Balrampur, Dhampur and peers are surging amidst the market sell-off

Shares of India’s sugar companies, Balrampur Chini Ltd., Dhampur Sugar Ltd., Praj Industries and others are trading with gains between 6% to 10% on Wednesday, March 4, featuring among the few stocks that are gaining amidst the broader market sell-off.A major reason behind the jump today is the spike in global sugar prices, triggered by a sharp rise in Crude oil prices due to the ongoing US-Iran war in West Asia.

An increase in oil prices is likely to support further transition to Ethanol and could result in major sugar producing countries such as Brazil, could shift more can towards ethanol production, instead of sugar.
In case of such a shift, supplies in the market could tighten, leading to a further increase in prices, a trend that is currently playing out globally.Volume in the sugar market rose as speculators covered short positions, reacting to higher energy prices, according to Mike McDougall, an analyst at McDougall Global View. Sugar is also used in biofuel production and demand can get a boost when crude moves higher.

The premium that refined sugar carries over the raw variety also jumped. That’s as raw supplies for the world’s largest standalone refinery refinery in Dubai come through the Strait of Hormuz, McDougall said.

Shares of Balrampur Chini are trading with gains of 6% and are the second-best performers on the Nifty 500 on Wednesday, while those of Shree Renuka Sugar, Dhampur Sugar, and Bajaj Hindusthan are trading with gains between 5% to 9% in today’s session.

(With Inputs From Agencies)