The stock market has witnessed euphoric moves across sectors over the past year, with many stocks becoming multibaggers, while posting strong gains from last year’s lows. There is one sector, however, that has not participated in this strong bull run: sugar.
Sugar stocks saw a strong rally till last year but since then have largely been in consolidation phase for nearly 10 months. Once a high-growth sector, the question now arises -- when will the bull reawaken in the sugar sector?
Interestingly, the past week saw sugar stocks showing signs of upside momentum, with many gaining between 5-8%.
“This sector has faced multiple headwinds over the last few quarters, which caused it to lose its appeal and underperform despite the overall market rally. However, we are now seeing some fundamental green shoots in the sugar sector after an 11-month drought,” said Praveen Kumar Yadav, Independent Trader & Investor.
Yadav pointed out that favourable monsoon conditions have led to excess sugar production, which bodes well for the ethanol economy and sugar exports. He believes the sector is now poised for gains in the coming weeks.
“Considering the tailwinds, the risk-reward profile in the sugar sector looks very attractive. Stocks are trading at reasonable valuations, where the worst has already been priced in, and the best is yet to come,” added Yadav.
Stocks with strong ethanol capacity are particularly expected to perform well in the medium term and are on his radar. Some stocks to watch for momentum upside, according to Yadav, include: Triveni Engineering and Industries Ltd
- Establishing a solid base in the 480-500 range.
- A fresh breakout above 510 could lead to a strong move toward 600+.
Magadh Sugar & Energy Ltd
- One of the strongest structures in the sugar sector.
- Recently retested the breakout in the 810-850 range.
- A 5-6% upward move is expected above the last swing high.
Shree Renuka Sugars Ltd
- Breaking out of a long consolidation within a tight range.
- Once it moves above 52, it is expected to target 60-65+ in the coming weeks.
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