Even as the broader market remained under pressure on Monday morning, sugar stocks stood out with sharp gains, drawing strong investor interest in an otherwise weak session.
Shares of Shree Renuka Sugars jumped 7.13% to Rs 28.38, while Dalmia Bharat Sugar and Industries rose 6.35% to Rs 367.40.
Dhampur Sugar Mills climbed 5.65% to Rs 141.12, and Avadh Sugar & Energy gained 3.49% to Rs 468.90. Balrampur Chini Mills also traded higher, up 1.96% at Rs 506.95.
The rally is notable because it comes at a time when benchmark indices are falling and markets remain volatile.
The reason behind this sudden surge is not just about sugar, it is about oil.
Crude oil prices have risen sharply due to tensions in West Asia. When oil becomes expensive, countries look for alternatives like ethanol, which is made from sugarcane. This is where sugar companies benefit.
In simple terms, many sugar companies now earn money not just by selling sugar, but also by producing ethanol that is mixed with petrol. When oil prices go up, ethanol becomes more valuable. This means sugar companies can earn more by using sugarcane to make ethanol instead of sugar. That is why investors are buying these stocks.
There is also a global angle. Brazil, the world’s largest sugar producer, may also shift more of its sugarcane towards ethanol because of high oil prices. If that happens, less sugar will be available in the global market, which can push prices higher. That is good news for Indian companies, especially those that export.
A weaker rupee is also helping. It makes Indian sugar cheaper for foreign buyers, which can boost exports and improve earnings for these companies.
All of this is happening at a time when the broader market is uncertain due to worries about inflation and global growth. In such situations, investors tend to move towards sectors where earnings look more stable or are likely to improve. Right now, sugar companies are seen as one such space.
What is changing is how the sector itself is viewed. Earlier, sugar companies were seen as purely dependent on sugar prices, which can rise and fall sharply. Now, with ethanol becoming a steady source of income, their business is becoming more balanced.
That said, this rally may not continue forever. Much will depend on whether oil prices stay high and whether global sugar supply actually tightens.
For now, though, sugar stocks are benefiting from a rare combination of factors, and in a weak market, that is enough to attract strong investor interest.