Sugar stocks decline after govt’s ethanol move Stock prices of major sugar companies fell on Monday after the government’s decision to discontinue the use of sugarcane juice, or sugar syrup, for ethanol production during the supply year 2023-24 (November-October).Stock prices of Balrampur Chini and Dhampur Sugar declined by 3% and 2.3% to Rs 397 and Rs 246, respectively, compared with prices prevailed on December 7, when the government had made the announcement. Share prices of Triveni Engineering and Shree Renuka Sugar witnessed a marginal decline compared with December 7 prices to Rs 47.35 and Rs 346.2.A senior official with a sugar company told FE that the real impact of disruption in supply of sugar syrup for ethanol production is yet to be assessed.“The restriction will result in lower diversion towards ethanol, which may lead to the ethanol blending ratio falling below 10% for ESY2024. The same was around 12% for ESY2023,” Sabyasachi Majumdar, senior vice president and group head, ICRA, said. However, the tight demand-supply situation is expected to keep sugar prices firm and profit margins at a satisfactory level.
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However, he believes that the impact on the Indian market is going to be temporary since there could be some short-term impact on flows into Indian equity markets. But since the Indian economy is on a strong wicket and will continue to remain resilient.
“Improved fiscal situation, controlled current deficit, stable interest scenario combined with good corporate earnings should lead to limited impact on the Indian bond market and equity market too,” he added.
The midcap and smallcap indices took a bigger knock with the BSE MidCap fell 2.51%, while BSE SmallCap index dived 4.18%. According to Amnish Aggarwal, head, research, Prabhudas Lilladher, the valuations were already high and some correction was expected. “If the situation sustains as it is then further correction can’t be ruled out,” Aggarwal said.
Telecommunication and industrials indices were the top laggards with BSE Telecommunication declining 3.82%, followed by BSE Industrials falling 3.26%. JSW Steel (-2.99%), Tata Steel (-2.52%) and Tata Consultancy Services (-2.44%) were the top losers of Sensex.
Surprisingly, both foreign portfolio investors and domestic institutional investors were net buyers today. While, FPIs net bought shares worth Rs 252.25 crore, DIIs have purchased shares worth Rs 1,111.84 crore, as per provisional data from exchanges.
Calling this a “normal phenomena” Pankaj Pandey, head, research, ICICI Direct said, “I will not really give too much weight to a single day buying figure. Amid concerns of elevated interest rate and geopolitical tensions, in a typical market cycle, 8-10% correction is possible at any point in time.”
The brunt of geopolitical conflict, elevated interest rates and rising crude oil prices was also felt by other Asian- Pacific markets. Jakarta Composite Index lost 1.57% followed by Shanghai Composite Index and PSEi, which fell 1.47% and 0.89%, respectively. Nikkei and KOSPI declined 0.83% and 0.76%.
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