Most of sugar stocks such as Shree Renuka, Balram Chini and Rajshree Sugars snapped their five-day long gaining streak and fell up to 10 per cent in trade on Thursday as investors judged the recent sharp rally was unwarranted.

Shares of Rajshree Sugars led the fall among sugar stocks and fell as much as 9.99 per cent to Rs 33.80. Shares of Uttam Sugar, Balram Chini, Shree Renuka, Sakthi Sugars and KCP Sugar were among major loser on the sugar pack and fell in the range of 8 per cent to 9 per cent.

Market expert Sudip Bandyopadhyay believes there is still an overhang on the sugar stocks and that the government needs to do something to ensure the entire industry and the commodity move in a manner which is desirable.

"Prices have moved up quite a bit based on news flows, but I will not recommend investing in sugar stocks at these levels," told Bandyopadhyay to ET now.

Sugar stocks have been on a gaining spree for last few days. As much as 11 sugar stocks hit their fresh 52-week highs on Tuesday and rose up to 20 per cent on expectation of lower sugar output this year owing to deficient monsoon.

Dharani Sugars, Mawana Sugars, Balrampur Chini, Shakthi Sugars, Simbhaoli Sugars, Dwarkesh Sugar and Empee Sugar were among the 11 sugar stocks that hit their 52-week highs in today's trade.

Meanwhile, Sugar industry body ISMA on Wednesday said the millers' cane price liability to farmers would reduce by about Rs 1,100 crore following the government's decision to give direct subsidy of Rs 4.5 per quintal to cane growers.

The Indian Sugar Mills Association (ISMA), however, said the cash-starved industry might need further assistance as losses are expected to be higher due to low prices of sugar.