Sugar as a sector has been rallying and have been popular amongst the trading community for a few months now. The multiple benefits that the sugar industry are now realising from the producing sugar are being discovered at large by the general investing commmunity. Sugar Industry has been stable for the last few years and now looks for a rerating due the following reasons:
1. Both the buying (raw material sugance) price and selling price (sugar) are fixed by the govt, providing a stable margin for sugar companies to work with. This eliminates unplesant surprises of lower sugar prices. 2. Sugarcane produces molases which can be further used to produce ethanol and alcohol. Both of which can add additional revenue for the industry. 3. The bagasse the left over of sugar cane can be used to generate power. The left over bagasse is able to generate more power than what is required by sugar companies so they are able to sell excess power for more revenue.
In the past one year sugar companies have delivered excellent returns and looks good for more. Renuka Sugars have given a fresh breakout on the weekly chart after a 8 - 10 month long consolidation with a substantial increase in volume. If market remains favorable we can expect Renuka to continue to do well in the coming months.
PS: This is a weekly chart so the investment horizon should be 6 to 12 months. Exit when the stock price gives a close below the 20Week EMA. you can track the performance and update for all active published ideas here.