Sugar sector had gone through a very bad phase during the bull run of 2006-2007...This commodity has got cyclical patterns depending on domestic and global demand....Currently, as forecasted, there is a possibility of sugar cane short supply leading to increase in prices.....Plus the festive season is on and there will be lot of sugar in demand during Christmas and New Year......Currently, the UP sugar mills have mentally accepted 140 rs/quintal on sugarcane prices and have decided to prepone their operations in the mills.....
Going forward, there will be tough times in equity markets.....So, even the slightest hints on any positive news on price front can lead to rally in the sector....Inflation has come down....So, possibility of sugar price increase can not be ruled out under the circumstances that these mills are facing uphill task to manage business.......
Lastly, sugar cos are trading at less the book value and the current prices seem quite reasonable.....Technically also they are attractive.......
My favorite picks are Shree Renuka, Balrampur.....These 2 enjoy high intraday trading volume as well........I expect reasonable upmove in coming 3-5 months.....
Disclosure: I have positions in this sector for both trading and short to medium term investment purposes......
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