How one can profit from sugar stocks
If one had invested Rs 1,000 in sugar companies in the year 2003, it could have become Rs 25,000-35,000 by 2006. During this period, Balrampur Chini witnessed its share prices moving up from a mere Rs 11 to Rs 197; Dhampur Sugar went from Rs 10 to Rs 257. Over the past 50 years, India's consumption of sugar has grown 3.5 per cent annually. However, irrespective of demand, the pattern noted earlier is what generally happens in cyclical industries. At the bottom of the cycle, share prices trade at a very depressed level and at the top, they command significant premium, leading to bumper profits. The sugar cycle may take six to seven years to complete a full round from boom to bust and boom again. Timing is important for investing in such companies. Typically, a boom starts when there is less sugar cane, low sugar production compared to consumption, followed by lower inventory or stock, higher imports and higher sugar prices, leading to bumper profits. But, once prices reach high le...