Sugar stocks fell after the Finance Minister failed to announce key measures for the sector. The approval for using sugar syrup to produce ethanol, an upward revision of the MSP, and the lifting of the export curb were top of the industry's wishlist.
Shares of Avadh Sugar, Bajaj Hindusthan, EID Parry, KCP Sugar, Rajshree Sugars, Sakthi Sugars, Ugar Sugar Works, and Uttam Sugar fell 2-4 percent following the Budget announcement.
Also Read | Budget hopes on MSP, ethanol push sweeten the sugar rally
The sugar industry had also been advocating for higher procurement prices for ethanol, support for sugar cane harvesters, and a long-term policy for sugar import-export and ethanol production.
The government's initial MSP for sugar, set at Rs 29 per kg in 2018 and raised to Rs 31 per kg in 2019, is also overdue for another upward revision, Centrum Broking said in a recent research report. Although current market prices are higher than the MSP (Rs 36 in Maharashtra and Rs 39 per kg in UP), raising the MSP would establish a baseline and boost investor confidence in the sector, the brokerage pointed out.
Elara Securities maintains a neutral view of the sugar sector in the short term due to the expected earnings strain in H1 FY25. However, the firm retains a positive stance in the medium to long term, driven by the ongoing Ethanol Blending Program (EBP).
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The EBP program is an initiative by the Government of India to encourage the use of ethanol in petrol to decrease fuel imports, conserve foreign exchange, and enhance value addition within the sugar industry.
Most sugar stocks had gained in the run-up to the budget. KCP Sugar and Industries Corp, Shree Renuka Sugars, Balrampur Chini Mills, Rana Sugars, Bajaj Hindusthan Sugar, EID Parry, Triveni Engineering and Industries, and Ponni Sugars (Erode) had gained 2-18 percent in a month. During the same period, Ugar Sugar Works and Simbhaoli Sugars had declined 3 and 4.5 percent, respectively.
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