Wednesday, April 1, 2009

Sugar Sector: Good Investment

We have been maintaining our bullish view on the Sugar sector since Nov.08, mainly on the expectations of lower production in the country. When the Govt. has been estimating country’s production at 22 million tonnes (mt) for season 08-09, in Nov. 08, we expected it to be 18.5mt. On collecting details of production on all India basis, upto 15-3-09, it is estimated at 13.1 mt. Season 08-09(expiring in Sept 09) is not likely to see a production of more than 15mt.

The reason for lower production is low yield per hectare of sugarcane crop, lower sugar recovery by the mills, farmers migrating to other crops like wheat, rice and potato and lesser number of running of mills across the country due to lower availability of sugarcane, even after paying higher rate above SAP in U.P.

If we consider opening stock of 8mt and an expected import of 2mt of raw sugar with estimated domestic production of 15mt, we will be having 25mt against our annual domestic consumption of 23mt. Therefore, as at 30-9-09, we will be left with a closing stock of just 2 mt which would be very alarming.

Though the Govt. is contemplating allowing import of white sugar at 0 duty against present rate of duty at 60%, but the same is not feasible and workable. Taking a price of $395 per tonne and a freight of $35 per tonne and adding a cost of Rs. 1,000 per tonne as port handling, insurance and transport the landed cost of white sugar works out at Rs. 23 per kg. against ex-mill price of Rs. 20 per kg. in Maharashtra and Rs. 21 per kg. in U.P.

Even import of raw is now not feasible unless the importer is confident of realising above Rs.23 per kg. Due to the lower raw price in Dec. 08, importers have contracted to import about 9 lakh tonnes of raw sugar. These include 5.25 lt by Shree Renuka Sugars, 90,000 tonnes by NCS Sugars, 50,000 tonnes by Dalmia Sugars, 40,000 tonnes each by Simbhaoli, Dharani and Rana Sugars, 25,000 tonnes each by Dhampur Sugar and the EID Parry-Cargill refinery at Kakinada, and 22,000 tonnes by the KK Birla Group. Since February 20, not a single new contract has been entered into.

Realising this shortage and hoping that this does not spoil the mood of the voters due to an expected steep rise in the price of sugar (as sugar , onion and potato are very sensitive items during elections, making Govt. to loose it) the Govt is making all the efforts to keep retail price within Rs. 25 per kg. till elections get over. This price control is achieved with free market release mechanism, releasing buffer stock created by the Govt. last year, inventory limits having imposed on the traders and by asking mills to go slow on price hike for a month or so.

Once the last phase of election gets over by 13th May it is certain that ex-mill price of sugar will rise to about Rs. 24 per kg. in next couple of months. This in turn will see a retail price of Rs. 28 per kg. Hence, mills carrying stock will reap windfall gain on its inventory. Also, Tamil Nadu mills will be at an advantage as they will continue to produce with estimated number of crushing of about 220 days. Those mills also have the benefits of lower cane price and higher realisation of Molasses.

Hence, sugar companies with higher inventory held by them will be making good profits which would get reflected in its share price from mid May. It is expected that all the sugar stocks would be able to rise by about 50% from its current levels in the next 5-6 months.
Source: sptulsian.com (By S P Tulsian)

Intraday Trading Calls for 1st April

Indian Stock Market may open Positive and remains positvie for the day today.
Today's Intraday Stock Tips / Trading Calls (Keep strict Stop Loss for Each Trade):

SCRIP NAME

TRIGGER

PRICE

TARGET 1

TARGET 2

REL CAPITAL

Buy Above

356.25

363.45

372.00

Sell Below

350.40

342.65

335.00

YES BANK

Buy Above

50.60

52.75

55.00

Sell Below

49.35

47.15

45.00

INDIABULLS REALEST

Buy Above

101.05

106.20

110.00

Sell Below

99.15

96.25

92.00

PUNJ LLOYD

Buy Above

92.25

95.50

98.00

Sell Below

90.15

87.55

84.00

AREVA T&D

Buy Above

204.75

209.20

215.00

Sell Below

200.70

196.10

190.00

SUNPHARMA ADVANCE

Buy Above

53.80

56.75

60.00

Sell Below

52.40

49.35

46.00

BARTRONICS

Buy Above

79.65

83.70

88.00

Sell Below

77.40

74.30

70.00

GOOD LUCK

Disclaimer

The information in this publication is provided by http://www.moneybazzar.blogspot.com/ is intended for use for Readers & Traders . Every effort is made to provide accurate information, but http://www.moneybazzar.blogspot.com/ cannot guarantee the accuracy of the information or of the market analysis. This is a newsletter and is for informational purposes only. It is not a solicitation or offer to buy or sell futures. There is a high risk of loss in trading futures. You should not trade with money that you cannot afford to lose. No representation is being made that any account will or is likely to achieve profits or losses similar to those discussed on this newsletter. The past performance of any trading system or methodology is not necessarily indicative of future results.



free counter