The Rise of Reliance: as told through its stocks
Reliance Industries Limited (RIL) is India’s largest publicly traded company. Read on to know more about history of Reliance stocks and it’s rise in …
29 Oct, 2021
7 min read
992 Views
Sugar stocks are indicative of important trends in the market. They are also an important cog in the industries sector of the economy. Read on to know more about its story.
Introduction
It is important for traders to keep tabs on the stock market on a frequent basis such that they can identify trends and recognize when a certain stock or industry is likely to be impacted for the better or for the worse. By being able to time the market, it is possible to make trading decisions that could accrue potential profits. That being said, being able to time the market is no easy feat and requires experience, dedication and even luck.
Set against this backdrop, sugar stocks witnessed a dip as the Sensex fell in the last week of September. This article seeks to examine the same.
Performance of Players within the Indian Sugar Landscape
When examining the stock of varied sugar companies, there were only four clear companies that experienced a rise in their value. These included Triveni Engineering & Industries that witnessed a hike of 1.92 per cent. This was followed by Simbhaoli Sugars which had a 1.77 per cent rise while Dalmia Bharat Sugar & Industries rose by 0.36 per cent. Sakthi Sugars witnessed a 0.34 per cent hike thereby allowing it to stand among other gainers.
On the flip side, Shree Renuka Sugars fell by 2.72 per cent. Dhampur Sugar Mills followed in its footsteps and witnessed a 2.36 per cent Dip. Rana Sugars, Mawana Sugars and KCP Sugar & Industries followed with 2.23 per cent, 1.86 per cent and 1.86 per cent dips respectively. Bannari Amman Sugars fell by 1.50 per cent, Ponni Sugars slipped by 1.37 per cent, EID Parry fell by 1.25 per cent and Rajshree Sugars & Chemicals dipped by 1.15 per cent.
The National Stock Exchange’s Nifty50 index witnessed a slip of 106.5 points arriving at 17748.6 while the 30-share Bombay Stock Exchange Sensex slipped by 410.28 points arriving at 59667.6.
Understanding the Dip in Sugar Stocks
While several sugar stock rates have appreciated in value majorly in 2021 alone and retail investors have gleefully flocked to the sweet, investing in the same requires an understanding of the industry.
The aforementioned dips in the stock of several sugar companies are owed to the cyclical nature of the sugar industry. This industry’s revenues are dependent upon sugar prices which are reflective of and tethered to the production of sugar along with its supply. During instances of almost stable demand, any fluctuations within the production or supply of sugar can cause its prices to rise and fall. This is most apparent in case of crop failures in Brazil which is recognized as the world largest producer of sugar. Such scenarios cause sharp hikes in the price of sugar. The sugar industry performs well in instances of prices rising. However, higher prices mean that farmers are motivated to grow more cane. Owing to the fact that Indian farmers are secured under Minimum Support Prices or MSP, there isn’t much risk associated with increasing the sugar grown. As incentivized farming gains credence, supply of sugar increases which causes its prices to plunge. This cycle then continues to repeat itself.
August saw the price of sugar rise within global markets owing to worries pertaining to supply shortages from Brazil. This was due to their sugar crop having been adversely impacted by frost. Sugar companies were expected to perform well immediately after. Now, however that time has passed and while sugar stocks are capable of accruing handsome returns in the short term, they must not be confused to be generators of wealth. Take for instance the aforementioned Dalmia Bharat which was worth INR 200 in January 2010 and valued at INR 120 in January 2020. Else look at Shree Renuka Sugars whose value lay at INR 100 in January 2010 and was INR 10 in January 2020. These 10-year return frames are most telling. They are not wealth creators and certainly don’t serve as consistent compounders.
Conclusion
Rather than hedging all of one’s bets on stocks pertaining to the sugar industry, it is recommended that investors consider investing in companies that have been consistently able to generate wealth over long time frames. In contrast to the lacklustre performance of sugar stocks in the period between 2010 and 2020, stocks belonging to companies like Asian Paints, Pidilite, HCL Technologies and HUL performed well. They allowed investors to enjoy the merits associated with multibaggers as they generated wealth.
Frequently Asked Questions
Q1. Do sugar stocks make for viable long-term investments that allow for wealth creation over the long term?
A1. Sugar stocks have a history of being better suited to short-term investments as they allow their shareholders to benefit from short term returns. Across longer time frames, however, sugar stocks aren’t likely to allow for wealth creation as the industry is cyclical.
Q2. What is a defining characteristic of the sugar industry?
A2. A defining characteristic of the sugar industry is its cyclical nature. This industry’s revenues are dependent upon sugar prices which are reflective of and tethered to the production of sugar along with its supply.
How would you rate this blog?
Related Blogs
Translate the power of knowledge into action. Open Free* Demat Account
Latest Blog
-
08 Jul, 2021
10 min read
The Success Story of Pharmeasy
Today, PharmEasy is a reputable and well-known firm whose aim is to become the best health care delivery platform in India.
-
01 Apr, 2021
7 min read
Vodafone-Idea: What went wrong?
Mergers and acquisitions can turn the eyes of stock market investors towards the possible action that such large-scale actions can bring to the futur…
-
06 Oct, 2021
5 min read
Byju’s IPO Plans
Currently, India's most valuable unicorn, online education provider Byju's, is in talks to raise $400 million to $600 million and then expedite plans…
-
10 Mar, 2021
7 min read
PVR - a comeback on the cards?
Who doesn’t like to watch movies. But when the COVID pandemic first hit the Indian subcontinent, investors began to withdraw from their investments -…
-
24 Feb, 2021
7 min read
Shree Cements: A lesson in Prudence
This article will help you take a deeper look into the rise of Shree Cements, through the lens of it’s stock performance over the past few years.
-
27 Jan, 2021
9 min read
HDFC Bank Ltd’s Journey to becoming the...
As of November 25, 2020, HDFC Bank had hit a market cap of ₹8 Lakh Crore and had become the third company to do so after Reliance and TCS.
-
06 Jan, 2021
6 min read
Tata Consultancy Services: A story...
Tata Consultancy Services (TCS) is the world’s most valuable IT company. Read this success story of how TCS expanded globally, acquired new verticals…
-
16 Mar, 2021
8 min read
Indiamart’s QIP: behind the scenes
Last year, when the pandemic had hit businesses hard across the globe, most people resorted to the internet to keep their businesses afloat.
-
15 May, 2021
8 min read
The Best Penny Stocks in India
Investing and trading on the stock market has the potential to generate profits.
-
07 Jul, 2021
10 min read
Ixigo IPO: Ixigo Plans a 750 Crore IPO
Ixigo is a travel portal and it plans to host an IPO of between Rs 1500 crore to Rs 1800 crore later this year.
-
13 Oct, 2021
6 min read
LIC Seeks to Appoint CFO
According to a notice on its website, the state-owned Life Insurance Corporation of India (LIC) is looking for a Chief Financial Officer ahead of an …
-
21 May, 2021
8 min read
Asian Paints: 7000% returns in 17 years
Some investment propositions have the ability to make investors – both the newbie and the expert alike – stop and stare.
-
08 May, 2021
8 min read
Adani Ports and its recent rise. Here's why
If you have been following the rise of Adani Ports’ stock price in recent weeks, you are probably curious as to what is driving this growth.
-
31 May, 2021
7 min read
The Rise of Metal Stocks Amid the 2nd Wave
The past few months have brought with them several changes.
-
07 Apr, 2021
7 min read
The Tata Motors Upheaval Story
The automotive industry has been famously tied to the performance of the extended economy for most countries.
-
23 Aug, 2021
6 min read
Clean Science, GR Infraprojects IPO...
This article seeks to shed light on initial public offerings (or IPOs) that have recently been up for grabs in the market. Included among them are Cl…
-
23 Jul, 2021
8 min read
Laurus Labs Share: More than 50% Return...
Shares of pharmaceutical and biotech company Laurus Labs have continued to surge upwards and have hit a new high amounting to INR 599 per share on th…
-
06 May, 2021
9 min read
Should you place your bets on ITC?
Investors trading on the stock market are advised to focus on maximising their wealth by making shrewd decisions based on the performance and fundame…
-
30 Aug, 2021
7 min read
Should you Invest in the Latest Sovereign...
For the uninitiated, sovereign gold bonds can be understood to be certificates issued and mandated by the Reserve Bank of India.
-
13 Jun, 2021
7 min read
Soaring commodity prices. Here's why
Prices of commodities in the energy, metal and agriculture sectors have seen a sustained rise in the first few months of this year.
-
05 Mar, 2021
7 min read
The LIC IPO Game Plan
IPOs have attracted overt attention of retail and institutional investors alike in the recent Indian stock market scene.
-
24 Aug, 2021
5 min read
Stocks to Watch: NMDC, Tata Motors,...
This article seeks to shed light on stocks that have recently been made available in the market. Included among them is the government’s stake in NMD…
-
05 Oct, 2021
7 min read
LIC IPO: All we Know So Far
While investors await the Life Insurance Corporation's mammoth public offering mostly happening this financial year, why do experts think the IPO has…
-
11 Jul, 2021
11 min read
Go Air IPO: Go Air looks to enter the IPO market
GoAir, one of India’s most popular airlines, is preparing for an initial public offering (IPO). Rebranding itself as “Go First”, the airline filed a …
-
09 Jul, 2021
9 min read
IPO Alert! Devyani International files...
Against all odds, the Indian market, despite a minor tailspin due to the nationwide lockdowns last year, has seemed to recover relatively well.
-
04 Apr, 2021
7 min read
Dr. Reddy's Laboratories Ltd - Is this...
2020 was a peculiar year, especially in terms of the industries that managed to flourish despite the challenges that the lockdowns and isolation meas…
-
11 Jun, 2021
7 min read
Stock Picks Based on Q4 Results
As FY21 drew to a close, it was a déjà vu moment as lockdowns (although state-level), and a second wave of the COVID-19 pandemic defined investor beh…
-
03 Jun, 2021
6 min read
Hotel Stocks on the Rise Despite Lockdown
The hospitality industry suffered a major setback when the prime minister announced a nationwide lockdown for 3 weeks at the end of March 2020.
-
01 Jun, 2021
8 min read
Muted Tata Communications stock in wake...
There is a meme going around that says: Sneezes went from “Bless you” to “To hell with you” real soon.
-
24 Sep, 2021
7 min read
Indian Railways Share Quarterly Results -...
The Indian Railway Catering and Tourism Corporation (IRCTC) is a subsidiary of the Indian Railways.
-
15 Jun, 2021
10 min read
A sneak peek at Zomato's IPO plans
Covid-19 came and turned the world upside down – tourism, airlines, fashion, F&B have suffered tremendously but online financial gateways, video conf…
Ready To Trade? Start with
Subscribe to #SmartSauda Newsletter
CONTINUE WITH GOOGLE
CONTINUE WITH FACEBOOK
