Shares of sugar companies surged on Wednesday on speculation that the government would announce a financial aid package for the sector that is facing severe financial strain due to the cost of sugarcane being far higher than that of sugar. As a result, UP-based sugar mills have put their crushing operations on hold.

While companies based out of UP were in focus, stocks of most sugar companies rallied with some hitting upper circuit during the trading session.

The largest sugar company by net sales, Shree Renuka Sugars, ended up more than 8%, after rising 13% during Wednesday's trade, whereas Bajaj Hindustan advanced nearly 14% and Balrampur Chini rose 10%, amid speculative buying and huge spike in volumes.

In the case of Shree Renuka, as many as 2.67 crore shares exchanged hands on the BSE and the NSE compared with its five-day average volume of 40.98 lakh shares and 30-day average volume of 98.45 lakh shares. For Bajaj Hindustan, more than 1.96 crore shares were traded compared with five-day average volume of 14.34 lakh shares and 30-day average volume of 32.8 lakh shares.

Experts said traders indulged in speculative buying based on reports that the government will offer special packages to sugar companies. “There was sudden buying interest in sugar stocks on hopes the government will provide financial aid to the sector which is facing financial problems,” said Jagannadham Thunuguntla, chief strategist and research head, SMC Global Securities.

Dhampur Sugar Mills surged almost 19%, while Dwarikesh Sugar Industries shot up 18.32%. Sakthi Sugars ended up more than 17%. Among others, the Mawana Sugars share spiked 17.15%, Oudh Sugar Mills advanced 15.4% and EID Parry ended up 2.3%. Experts, however, recommended staying away from sugar stocks due to their wild price fluctuations linked to government policy decisions.

Most of 100-odd sugar mills in UP decided to shut shop after the state government refused to heed demand of sugar mills in the region for a sharp cut in cane prices for the current season.