uebleiyu

Sugar futures witnessed heavy sell-off that occurred mainly due topressure exerted by mills after the court decided to rule the caneprices in favor of the UP state government,

Kotak Commodity Services`s research report

 stated.

The mills had appealed to the court against the UP state advisedprice of Rs 125 a quintal. The court then asked mills to pay at aninterim price of Rs 110 a quintal.

Market Fundamentals:

The market is factoring potential drop in the production for thenext two years. There is anticipation that India could import sugarfor the season 2009-10. On the other hand the weak Indian currencyhas given the Indian sugar exporters a hope to cash in highermargins. Sugar at the international market is quoting relativelyfirm. As of yesterday`s (Wednesday) close, the London White sugarfor the August delivery was quoting at USD 393.5 a ton while theNYBOT raw sugar for the October delivery was quoting at 13.86 centsper lb.

Outlook

Sugar would be range bound as pressure from mills to generate fundsto clear of cane arrears would provide a negative risk to theprices. On the other hand decent demand from exporters andanticipation of a fall in output in the coming season would keepprices well supported.

It is advisable to take long position in the August contracttargeting the level of Rs 1,560-1,580.