Sugar stocks rally up to 13% after reports of short supply due to erratic rains

Sugar stocks including Avadh Sugar & Energy, Dalmia Bharat Sugar, Mawana Sugars, Dhampur Sugar Mills and Uttam Sugar rallied up to 13 percent on Wednesday on reports of a possible supply shortage this year due to lower production.

According to reports, Switzerland-based trader Avlean expects a shortage of sugar supply this year due to expected lower production in India, the second-largest sugar producer in the world after Brazil.

India faced a 36 percent rain deficit in August, which was the driest August in a century leading to speculation that the Kharif crop output including sugarcane would be hit this year. The rain deficit in two key sugarcane-growing regions of Maharashtra and Karnataka was around 50 percent below average this year.

The expected lower output also led to expectations that India may impose a ban on sugar exports for the first time in seven years. Lower production and short supply fears led to a spike in sugar prices in the world markets.

Avlean reportedly stated that global markets may face a deficit of 5.4 million tonnes of sugar in the coming season. Following the reports, shares of Avadh Sugar & Energy soared by 13.55 percent to hit a 52-week high of Rs 695. The shares of Mawana Sugar and Uttam Sugar Mills also jumped to 52-week high mark.

Shares of Dalmia Bharat, EID Parry, Dhampur Sugar, Balrampur Chini  and Bajaj Hindustan also gained in the trade on Wednesday.

Here's how the sugar stocks are faring at 1:00 pm: