The rally in sugar stocks is largely being driven by a sharp spike in crude oil prices, which rose in early Asian trade and are on track for a strong monthly gain.
Brent crude surged up to 3% to $116.5 per barrel, nearing its recent highs of $119, while US crude (WTI) moved above $96 per barrel for the June contract and crossed $102 for May deliveries.
The rise in crude prices follows an escalation in geopolitical tensions, with Iran-backed Houthi militants in Yemen entering the conflict and the deployment of over 3,500 US troops to West Asia over the weekend.
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Higher crude oil prices typically boost the attractiveness of ethanol as an alternative fuel. This directly benefits sugar companies, many of which have diversified into ethanol production.
In simple terms, sugar companies are no longer dependent solely on sugar sales. They also produce ethanol, which is blended with petrol.
When crude prices rise, ethanol becomes more viable and profitable, allowing companies to divert more sugarcane towards ethanol production and improve margins. This shift is a key reason behind the renewed buying interest in these stocks.
Meanwhile, Brazil, the world’s largest sugar producer, is expected to see production decline to 40.3 million tonnes in the 2026-27 season, down from 43.5 million tonnes in the previous year.
Lower global supply could push sugar prices higher, which would benefit Indian exporters.
A weaker rupee further adds to the advantage by making Indian sugar more competitive in global markets, potentially boosting export realisations.
Among individual stocks, shares of Balrampur Chini Mills Limited were up around 1%, while Shree Renuka Sugars Limited, Dalmia Bharat Sugar and Industries Limited, and Bajaj Hindusthan Sugar Limited gained up to 11% during the session.
