Reuters Market Eye - Shares in Uttar Pradesh-based sugar companies were trading lower after the state raised the price at which sugar mills buy the new season crop by up to 16 per cent to 290 rupees per 100 kg.
Morgan Stanley said in a note the hike in the price of cane in the current sugar season by 2,920 rupees per tonne is much higher than expectations of a 2,820 rupees pertonne hike.
"Profitability of north Indian millers is likely to be dented," it added.
The hike in procurement price will increase the cost of production, which, at around 35,000 rupees per tonne, is comparable to the current spot sugar prices, implying "no profits for the sugar division at the operating level," Morgan Stanley added.
Shares of Balrampur Chini (BACH.NS) fell 5 percent and Bajaj Hindusthan (BJHN.NS) was down 1.25 percent, while Shree Renuka Sugars (SRES.NS) fell 2.1 percent.