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The sugar stocks are having a sweet rally. The YTD returns of these stocks like Dwarkesh (up 72%), Dhampur (up 70%), Avadh Sugar (up 57%) have given the much-needed breather to the investors’ portfolios in these volatile times.
But why are these stocks on steroids? The answer lies in its byproduct – Ethanol.
What is Ethanol blending?
Ethanol is a biofuel obtained mainly from Sugarcane and corn via a fermentation process. Ethanol is a kind of alcohol. A variety of alcohols like Methanol, Butanol, and Ethanol are being used to fuel the ICE & Petrol engines since the 1920s. Unlike oil, this byproduct of crops is considered renewable energy.
India is the third-largest importer of Crude Oil in the world. Our oil import bill exceeds $100 Billion in 2021. India imports close to 85% of its domestic oil needs. Any increase in oil prices will directly impact our fiscal deficit.
The cause & the effect
India initiated the use of ethanol as an automotive fuel in the year 2003. Ethanol mix had increased from 1-1.5% in 2014 to 8.5-10% as of 2022. The ratio is only going to increase further.
In 2020, the government targeted 20% ethanol blending in petrol by 2030. The deadline was later changed to 2025. Five years ahead of its initial target.
The demand for ethanol was up ~9 times in the last 8 years. In 2014 the Oil marketing companies procured 30 Cr litres. This is expected to reach 1016 Cr liters by 2025.
There is going to be a huge demand for ethanol in the next 3 years. The sugar companies are direct beneficiaries of this uptrend.
Having said that, Sugar stocks are more cyclical than sugar companies. The stock prices peak much before the earnings do. So, let’s keep an eye out for it.
LIC may not be a well-run insurance company, but it is the most trusted of them all. For the past 65 years, it has been a household name for millions in India. Life Insurance is the second-largest financial savings instrument after Fixed Deposits, and it is not an exaggeration to say LIC has single-handedly got Life Insurance at this scale.
Now, LIC is coming out with an IPO and we have five reasons why you should NOT subscribe!
Russia Ukraine war has highlighted weapons of war that we never thought existed. While Russia threatened a nuclear action, the world has already nuked the Russian financial system.
This has created havoc for Russia and has also made other nations nervous. Every country that holds reserves outside their own territories has now realized that their money can anytime be sequestered by the US or Europe. However, there can be ways in which countries can protect themselves from such financial sanctions.
Markets may give you profits or not. But, they surely give you an itch. An itch to do things that may be too risky, entertaining, or involve a jpeg of an ape. This itch can be dangerous to your portfolio. So what to do about it and how to think about it?
Crypto scams come in a variety of variations. But possibly, the most famous is the dreaded rug pull. These are essentially projects where the development team drums up interest in the token they created… Only to abandon the project after enough outside investment dollars have poured in.
Then the team cashes out and disappears with the funds raised. And in the end, investors are left with an asset that holds no value. Such rug pulls come in different variations and this article covers these.
Have you ever invested in something “extremely risky” or gambled for fun?
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