So when Maharashtra State Cooperative Sugar Factories Federation states that the output is expected to decline by 9%, it is something that should be closely monitored as it becomes an important piece of news. (Read the news)
Why is sugar important?
A decline in sugar production will force the government to keep its ban on exports. Also it will increase the price of the sugar as there will be a shortage in supply. Add to this the fact that sugar has a higher weightage in the calculation of index. When sugar prices rise, inflation also rises.
All of this should open up opportunities for stock investors in the coming months. The picture will be clear by October when crushing season starts and as government response would gain clarity.
Till then, mark out these six stocks which can be brought at an appropriate value, as they have the potential to prime beneficiaries from the next sugar rally that takes over the market and our lives.
The stocks to follow are:
Shree Renuka Sugar
E.I.D. Parry (India)
Triveni Engineering & Industries
Bannari Amman Sugars
Saraswati Industrial Syndicate
How we selected these stocks?
There are 38 stocks that are part of the sugar industry. But only eight stocks qualified the simple screen, where certain ratios; price-to-earnings, price-to-book, return on equity, operating profit margin and return on capital employed - of the stocks were required to be positive. And when we checked to see how many of these companies had a market capitalization of more than Rs 500 crore, another two companies were also dropped leaving us with six companies. (The screening was done using www.moneysights.com)
Recommendation in the sector: Bannari Amman Sugars (Read More)