The run-up in sugar stocks is scaling new highs as investors continue to track rising domestic sugar prices and the government’s latest move to tighten inventory limits.

As per Reuters, the Government has ordered that no dealer using more than 10 metric tonnes of the sweetener per month shall hold inventories for more than 15 days. The Reuters report indicated that the order will come into force on September 1 and remain in force until November 30, the notification said.

The rally in sugar stocks is broad-based, with several sugar companies gaining sharply during the session. Dhampur Sugar Mills rose around 6%, while Dwarikesh Sugar Industries also gained nearly 6%.

Bajaj Hindusthan Sugar advanced about 5%, Shree Renuka Sugars climbed 4% and Balrampur Chini Mills gained around 3%.

What is keeping sugar stocks in focus? Let’s take a look –

The immediate trigger is the sharp rise in domestic sugar prices.

Benchmark ex-mill sugar prices in Maharashtra have reached around Rs 5,400-5,560 per quintal, adding to expectations of better realisations for mills that are holding inventory.

The rise in prices has been linked to tight availability.

Consumption exceeded production during the 2025-26 sugar season, which began on October 1, 2025. As a result, mills are entering the next season with lower pipeline inventories.

Sunny Agrawal, Head of Fundamental Research at SBI Securities in conversation with Financialexpress.com earlier said, “Tightness in demand-supply situation has led to firming up of sugar prices and this augurs well for all the sugar mills.”

He added, “The surge in sugar prices will help them mitigate margin pressure in the ethanol division where there has been no price hike for the last 3 years.”

“Our preferred bets in the sugar segment will be Balrampur Chini, Trivenni and EID Parry,” added Agrawal.

The government has now stepped in as sugar prices have moved higher.

Under the revised rules, dealers buying more than 10 metric tonnes of sugar per month can hold inventory for only up to 15 days.

The restrictions is likely to remain in place from September 1 to November 30, with monthly sugar sales also being monitored.

While higher sugar prices are currently helping mills, analysts caution that the margin benefit may be temporary.

Poonam Upadhyay, Director at Crisil Ratings, said, “The current rally is expected to provide only a temporary lift to operating margins, with benefit likely to moderate as supply conditions ease.”

For sugar stocks, the near-term picture therefore depends on two forces moving in opposite directions – higher prices are supporting mill realisations, while government intervention could prevent prices from rising too sharply.