The stock of Kolkata-based sugar manufacturer Balrampur Chini Mills Limited (BCML) has been on a growth spree recently as it surged around 9% in the last 2 sessions!

2022 started on a great note for the company. The stock was on a roll, seeing bullish momentum since late December 2021. Due to the government’s emphasis on ethanol blending in fuel, all sugar stocks had a sweet run on the bourses at the time. Balrampur Chini’s stock had gained over 46% in the December-January period alone!!

However, the momentum was temporarily lost as tensions between Russia and Ukraine began escalating. BCML declined alongside the Indian markets as the tensions led to a global selling pressure. The day Russia attacked Ukraine, BCML’s stock tanked 7.5%!

However, the stock recovered the next day as it continued its upward move. Higher exports and greater importance on ethanol blending helped the stock reach a lifetime high of Rs 522 per share. The stock faced strong rejection at that level as the prices reversed and the stock witnessed a trend reversal.

The stock began losing very fast as the sugar sector began witnessing increased government intervention. In the latter half of May 2022, the government of India imposed a restriction on the export of sugar, sending all sugar stocks crashing.

BCML was no exception as it lost 17% in 3 sessions!! Surging inflation and global supply chain issues compelled the GoI to impose a cap of 10 million tonnes on sugar exports. While it was an attempt to cool domestic sugar prices, sugar companies were suffering from higher raw material costs. 

The downtrend was fairly sharp during the April-May period as BCML lost 32% during the time! Although the trend eased somewhat after that, the stock kept declining as the export restriction showed no sign of easing. Matters took a turn for the worse when the government announced an extension of the export ban by 1 year in October 2022. 

BCML declined 6.6% in a day as the government wanted to ensure sufficient local supply at valid prices during the festive season. However, the stock reversed after that as it made higher highs and eventually went above the Rs 400 mark once again. 

However, the stock has been range bound ever since (as evident by the chart below). But the momentum was revitalized once again in March 2023 when global sugar prices touched 6-year highs due to poor produce. 

However, Indian sugar produce saw a growth of 2.8% on account of which the Indian government indicated a reconsideration of the export restrictions. This led to a surge in sugar stocks once again as they are currently in the spotlight. 

 

What is the future outlook for Balrampur Chini Mills?

Fundamentally, Balrampur Chini is not in a very good position. Its sales declined 20% YoY in Q3FY23 and a profit of Rs 44.41 crores, down 37.5% YoY, but significantly higher than the loss of Rs 32 crores reported in Q2. 

However, the outlook for the sugar sector is fairly positive. The GoI has permitted an additional one million ton of export provided the country meets a production target of 33.6 million tonnes. Moreover, the growing demand for ethanol will also support the sector in the long term.

 

Technically, the stock is trading above it's 5,20,50,100 and 200-day averages. RSI is at 60, which is fairly close to its oversold zone at 70. 

It recently breached through its resistance, now support, at Rs 381.60 (marked in blue). Seeing the positive outlook of the sugar sector, the stock could reclaim it's Rs 400 mark in the coming sessions before any selling pressure drives it back down.