Tezzbuzz Desk – There was a sharp decline in the shares of Chinese companies during early trading on Friday, August 21. Investors' concerns increased after the government approved duty free import of 10 lakh metric tonnes of raw sugar to increase the supply of sugar in the domestic market and control rising prices. This news had a direct impact on the shares of Chinese companies and many major stocks fell by up to 5 percent.
Shares of Dalmia Bharat Sugar were under maximum pressure in Friday's trading. The company's shares fell by about 5.47 percent to Rs 480.30. Apart from this, a decline of 4.32 percent was recorded in Dwarikesh Sugar Industries and the share reached Rs 52.99. Shares of Balrampur Chini Mills fell by 4.15 per cent to Rs 735.25 and shares of Triveni Engineering and Industries fell by 3.82 per cent to Rs 288.60. Apart from this, Uttam Sugar Mills fell by 3.07 per cent, EID Parry by 2.22 per cent and Dhampur Sugar Mills by 1.99 per cent. Shares of Avadh Sugar and Energy fell by 1.53 per cent and Shares of Bajaj Hindustan Sugar were down 1.41 percent. Shree Renuka Sugars also saw a decline of about 1 percent. Shares of Simbhaoli Sugars, however, remained almost stable.
In fact, the government on Thursday has allowed duty free import of 10 lakh metric tonnes of raw sugar till October 31. The aim of the government is to increase the availability of sugar in the domestic market and control the prices which have reached record levels. India generally imposes almost 100 percent duty on sugar imports. In such a situation, permission for duty free sugar import on a large scale after almost a decade is being considered as a big step for the market. Sugar prices have seen a rise in recent months. Due to low production, domestic sugar prices have increased by about 40 percent in the last two months. This decision of the government has come at a time when the festival season is near. The demand for sugar in sweets, confectionery and other food products increases during festivals. In such a situation, the government wants to maintain adequate supply in the market through additional imports.
Under this decision, sugar refineries present at ports can apply for import of raw sugar. These refineries will also be allowed to sell refined sugar prepared from imported raw sugar in the domestic market by the end of October. The government has also recently tightened the rules for maintaining stock for big consumers. Dealers who consume more than 10 metric tons of sugar in a month have been instructed to keep stock equal to 15 days' consumption. This system will be applicable from 1st September to 30th November.
Duty free import is expected to increase the supply of sugar in the domestic market and soften the prices. However, this may impact the earnings of sugar producers, as the profits from higher prices may reduce. This is the reason why investors started selling shares of Chinese companies. The interesting thing is that this decision of India had the opposite effect on the international market. After the news of India's return to the import market, London White Sugar and New York Raw Sugar futures saw a rise of about 4 percent. It is clear from this that the steps taken by the government to control domestic prices are going to increase pressure for Indian sugar companies, but can boost the demand for sugar in the global market.