Sugar Dreams

Investment Strategy in the light of proposed decontrol of Sugar prices.

This moonsoon season has coincided with the deregulation season this time. Everything is getting decontrolled, next on line is sugar and it is again a major plus for sugar producers, efficient markets and better price discovery. Consumers will benefit in the long run with ‘efficient prices’.

If government estimates are to be believed, this year is going to be a surplus for sugarcane production and sugar supply will outsrip demand. No better time to decontrol, three months time frame is what they are looking at. If you are an investor, no better time to pick up a few lots of sugar company stocks. Balrampur Chini is the only stock I am following for this sector and it is trading at around 85-86 levels. I have a target of around 120-130 with a 4-6 months investment horizon. Keep a stop loss at around 75 and go long this stock. There is likely to be major upside with a few positives lined up for this sector. For commodity traders, go short sugar with 2 months expiry (though watch out for seasonal trends on increases in prices around the festive season).

No more ‘Chini Kum’, enjoy monsoon with lots of sugar (and some sugarry returns) up your sleeve.