Sugar Futures closed little higher on bargain buying and reports of good physical demand from the bulk buyers. However, the prices have been supported on reports that center allows duty-free imports of 5 lakh tonnes of raw sugar. Prices have increase in recent trades due to ICRA report that the Sugar production is likely to decline by 19% to 203.3 lakh tonnes (lt) during sugar year (SY) 2017, due to poor rainfall during previous monsoon in key producing states like Maharashtra and Karnataka. As per physical market players, India's sugar output in the ongoing season ending Sept is unlikely to touch the 200 it mark.

Raw sugar futures fell on Monday on technical selling as traders liquidated out of the May contract, which expires at the end of this month. The market is also monitoring demand from India and China, as well as increasing pressure on the European Commission to alleviate dwindling domestic stocks.

Outlook

We expect sugar prices to trade sideways on reports of duty free imports of raw sugar which may keep the stock levels at comfortable levels for the season. However, good demand from the stockists and bulk buyers during the coming festival season and summer season may support sugar prices.

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